29 Jun
2010

Scam loans are a huge problem for the loan industry. They make customers suspicious of all lenders and also deprive customers (and legitimate businesses) of cash. In some cases, loan scammers even steal identities and cause years of ruined credit, legal problems, and other headaches for customers. While loan scams are not always easy to spot, here are some red-flag signs you should look for:

1) Bad contracts. When applying for personal loans, payday loans, or other loans in person, read over the contract and even take it home with you before you sign it to have someone look it over for you. Often, bad terms and hidden fees are hidden in the fine print of contracts and unless you know what to look for, these clauses can be hard to spot.

2) Requests for money up front. No legitimate payday lender or personal loan lender will ask you for money up front. Usually, only car loans and mortgages require a deposit. Scam lenders will sometimes pressure you to send money via wire transfer, MoneyGram or a cashier’s check. Never do this. No legitimate company will ask for money this way because your money cannot be recovered if you send it this way – even if you later learn the lender was a fraud.

3) Insecure websites. If you are applying for online loans, look for valid SSL (security certificates). Also, look for VeriSign, McAfee/Norton, Better Business Bureau, Truste, and other security companies links. Be wary of companies that provide just the graphics for these security companies, without valid links. Also, do not trust sites that do not have a clear security guarantee and privacy policy on their websites.

4) No clear contact information. You should know exactly who you are getting money from and you should have a business name and contact information so that you can verify the legitimacy of a company. Also, this contact information is important in case you need help with your loan later on.