Quick online loan scams: Top 7 ways to avoid falling victim
Consumers lost billions of naira to fraudulent practices this year. Potential fraudsters pounce on those who are most in need or the most likely to accept a fake offer. If you’re not careful, you might find yourself on the receiving end of a quick loan scam where you could potentially lose your money.
While this isn’t a comprehensive list, some of the most common ways to spot a quick online loan scam include the following:
- If the lender is not interested in your credit history
Truly reputable lenders make it clear that they’ll need to look at your credit, sometimes getting reports from all major credit bureaus. Most lenders need to know whether you have a history of paying bills on time and in full to make sure you’ll be diligent about repaying a loan. Fraudulent businesses aren’t interested in your creditworthiness. They tend to seek high-risk borrowers who are likely to fall behind on loan payments and incur excessively high late fees and penalties.
If the lender is not registered
The CBN and other regulatory authorities require that lenders and loan brokers register before they carry out finance business. Check the lender’s website to verify whether it is legally approved to conduct loan business. If a lender you’re interested in does not list as registered, you could be dealing with a loan scam.
- If the lender demands details of your ATM card
Some scammers have been known to require details of ATM cards from borrowers, claiming that they need it for insurance, collateral or fees. This is a scam. Legitimate financial institutions may charge a fee for your application, appraisal or credit report, but those charges are deducted from your loan. A prepaid card is a big red flag. It’s virtually as untraceable as cash, and you won’t be able to report it as stolen if you’ve given it to a lender.
- If the lender calls, writes or knocks
If you get a loan offer by phone, through the mail or even through a door-to-door solicitation, be on your guard. It is illegal for companies to offer a loan over the phone and ask you to pay before they deliver.
Takeaway: A reputable lender will not target you over the phone, through direct mail or through door-to-door solicitation. Look for lenders that advertise through traditional online and mass media.
- If the lender has no physical address
Every lender you’re interested in should provide a physical location. Run it through Google Maps just in case. Some businesses running quick loan scams will list addresses that are actually vacant lots, so it’s important to verify this.
If you don’t find any sign of a physical address, avoid the lender. Many fraudulent businesses are untraceable so they can avoid legal consequences.
Takeaway: Don’t do business with a company that cannot provide a physical address, and always verify that the address is legitimate before you proceed.
- If the lender pressures you to act immediately
Don’t fall for the urgency plea. One of the hallmarks of quick loan scams is giving you an immediate deadline to sign on for a loan because the offer expires quickly — like within a day.
Lenders that use such high-pressure tactics could be up to no good. It may be a ploy to get you to make a rash decision.
Takeaway: Avoid offers with immediate deadlines for you to make a choice. You should have days and possibly weeks to accept a loan offer.
- If the lender is not transparent about its fees
Scammers will avoid posting their fees prominently on their websites or disclosing them when asked. They may also tell you that you’ve been approved for a loan and then demand a fee from you upfront.
Hidden fees that are imposed after loan approval are a red flag. The best advice is that you walk away from any company that follows this practice, particularly if you’re told that the up-front money is for such things as “processing,” “insurance” or “paperwork.”
The bottom line
If you need a quick loan, do your research and compare multiple lenders to make sure you’re getting a good rate from a trusted source. Even if you don’t have great credit, there are plenty of quick loan lenders that offer loans to borrowers in need regardless of credit status. Don’t be duped into falling for a scam and instead, find a company that’s willing to work with you were you are.
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