Applying for a personal loan during hard economic times opens the door to potential scams. The majority of lenders and banks are trustworthy and would never act in an unprofessional manner. These banks have the applicant’s best interest in mind, and they aim to offer the best loan products on the market. But when an applicant doesn’t have an existing relationship with a bank, or when the lender or loan broker is anonymous, this can create a potentially damaging scenario.
Having limited loan choices because of bad credit or simply being unfamiliar with the lending process increases the likelihood of being scammed when getting a personal loan. But with a little education and insight, applicants can protect themselves and recognize shady lenders.
Scam #1: Inflating the Interest Rate. The loan quote received from one lender should be competitive with quotes received from other banks. Some banks take advantage of bad credit applicants and charge them interest rates that exceed the current average.
Scam #2: Advance Payment. A reputable bank will not request an upfront payment or charge a fee to process and review applications for personal loans.
Scam #3: Unsolicited Communication. Be leery of banks that make unsolicited telephone calls or send random emails with invitations to apply for a personal loan. These banks are likely phishing for personal information, such as Social Security numbers and bank account numbers.
Scam #4: Discourages Shopping Around. Honest lenders recognize the importance of shopping around and comparing other rates. Applicants should think twice and be wary of lenders who discourage rate shopping. These lenders might have unethical loan practices or look to take advantage of desperate borrowers.
Scam #5: Can’t Verify Address or Location. Trustworthy banks and lending companies should have a physical address, telephone number, and company website. When working with an out-of-state or online lender, applicants should request information regarding the location, and then use Google maps and Internet directories to confirm this location.
Scam #6: Threatens Legal Action. Loan applicants have the right to reject a bank’s loan offer and use another bank for their personal loan needs. Some banks scare applicants into closing on a loan with empty, baseless legal threats.
Scam #7: Pressure Tactics. Applicants should avoid banks that pressure them to borrow more than they can afford to pay. These banks are only focused on their profit and bottom line.
Scam #8: Social Security Number. No credit check personal loans from cash advance and payday loan companies are legitimate . But applicants should move on if they’re required to submit their Social Security numbers and pay attention to the APR offered. This information is only necessary if the lender conducts a credit check.
Scam #9: Guaranteeing personal loans before receiving the application. Banks cannot guarantee a personal loan without first verifying an applicant’s credit history and/or financial history.
Scam #10: Providing Blank Loan Documents. Applicants should never sign blank loan documents or documents that do not reveal terms, such as the loan amount, interest rate, and monthly payment. After acquiring an applicant’s signature on a blank document, lenders can dishonestly fill in the blanks with different terms or add information that the borrower didn’t agree to.