Here’s how to avoid a personal loan company scam

Don’t get scammed. Watch out for these red flags and protect yourself. (iStock)

It’s an unfortunate reality that most people will interact with at least one scammer when they’re filing financial paperwork for different types of loans, like student loans or a home loan. If you’re looking for a personal loan to help cover expenses, this type of scam can be particularly painful.

While there are an abundance of personal loan scam companies, there are plenty of reputable personal loan companies that are willing and able to help you get the funds you need. You’ll need to watch out for some red flags when you’re searching for a loan.

HOW TO FIND THE BEST PERSONAL LOAN FOR YOUR NEEDS

Taking a little extra time to research potential lenders and brush up on loan scam warning signs could save you a lot of heartache. You can explore your personal loan options safely by visiting Credible to compare rates and lenders.

How to verify a personal loan company

During your search for a personal loan company, there are a few things you can do to check if the loan company is legitimate.

1. Read the website carefully: Make sure the lender is registered to offer loans in your state. Double-check for spelling errors and awkward grammar. While many scam websites are getting better about looking legitimate, it’s often easy to spot a scam site by paying close attention to syntax.

2. Search for reviews of the company: Look for reviews on Google and assess the company's online presence. Search the lender’s name with "customer reviews." Other people may have been scammed by the same company, so this is also a helpful way to determine which recognized companies you may want to work with based on customer experiences. You can also visit the Better Business Bureau to get some detailed information about lenders.

If you’re looking for the best personal loan rates, head over to Credible to view your options. You can see rates from multiple lenders and get overviews of each company.

WHAT DO TO BEFORE APPLYING FOR A PERSONAL LOAN

3. Check the company’s registration: Lenders are required to register in each state they serve. Search the company’s name and "license." You can also use your state’s website to check a company’s licensing status.

How to know if you’re being scammed

There are some common red flags to look for when it comes to a loan scammer.

1. Guaranteed approval: Reputable lenders always check to see if you have bad credit. If the lender offers a loan agreement without checking your credit history or if you do have poor credit, you’re either getting scammed or the company offers the equivalent of payday loans, which can have interest rates that exceed 100%.

2. Unsolicited texts or phone calls: If you get a text with a link asking you to fill out your information so you can receive money, it could be a warning sign, so delete the message and move on. You should also ignore the phone calls from companies promising funds or loan forgiveness unless you are familiar with the lender and have given them your information.

3. Check their email: If you receive an email from a lending company, look at their return email address. Anything from Gmail, Hotmail, Yahoo, or other major email company should be looked at as a personal loan scam warning sign.

4. Beware of phishing scams: These often require you to click on a link and enter personal information. These often look very real, but they are just a way to collect your personal financial information.

5. They deposit money in your account and ask you to send it back to release your loan: One common scam is when a "lender" says they must send you some money to confirm your bank account. This is never how a legitimate lender works.

Looking for the low-cost loans? Visit Credible to use their personal loan calculator and find the best personal loan rates.

16 OF THE BEST PERSONAL LOANS IN 2021

What to do if you get scammed by a loan company

If you become a victim of a scam company, you have several options. First, contact your bank and any other accounts that may have been accessed by the scammer. Ask the bank to freeze your account and send you new cards. You may also be able to dispute charges and have the money refunded.

Second, contact the credit reporting agencies – Equifax, Experian, and TransUnion — and have them put a freeze on your accounts. A freeze prevents any new loans or credit cards from approval. While this could cause problems if you need a personal loan, it’s an effective way of protecting your credit until you’re ready to unfreeze the account. The freeze will not affect any current accounts or damage your credit score. Alternatively, you could put a fraud alert on your account so that you’re notified any time someone accesses your credit information.

Third, report the fraudulent company to the FTC. This helps them track scammers and protects other potential victims. Don’t forget to change passwords to your bank accounts, social media accounts and email.

When you're searching for legitimate loan companies, be sure to take the proper precautions and ensure you aren't falling for a scam. There are numerous strategies to utilize verifying lenders and loan companies online, as well as steps you can take to mitigate the effects and avoid potentially losing more money, falling victim to identity theft or something worse.

You can help ensure that you’re using a legitimate company and aren't browsing loan frauds by using an online marketplace like Credible to explore your personal loan options. Taking time to research lenders before providing personal information is the best way to protect yourself.

DO THESE 5 THINGS BEFORE CHOOSING A PERSONAL LOAN LENDER

Have a finance-related question, but don't know who to ask? Email The Credible Money Expert at [email protected] and your question might be answered by Credible in our Money Expert column.

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