Are you looking for a loan or credit card but don't think you'll qualify? Have you been turned down by a bank because of your poor credit history? Scammers, often calling themselves "loan brokers", are looking for you! And they will try to scam you into paying a fee in order to get a loan or credit card. That is money you will never see again.
You may be tempted by ads and websites that guarantee loans or credit cards, regardless of your credit history. Rule number one: Legitimate lenders never "guarantee" or say that you are likely to get a loan or a credit card before you apply, especially if you have bad credit, no credit, or a bankruptcy.
How to Recognize an Advance-Fee Loan Broker Scam
Look for these warning signs of a loan scam:
- The lender doesn't care about your credit history. A lender may offer loans or credit cards for many purposes ' for example, so you can start a business or consolidate your bills. But one who doesn't care about your credit record should worry you. Ads that say 'Bad credit? No problem' or 'We don't care about your past. You deserve a loan' or 'Get money fast' or even 'No hassle ' guaranteed' often indicate a scam. Banks and other legitimate lenders generally evaluate creditworthiness and confirm the information in an application before they grant firm offers of credit to anyone.
- Fees aren't disclosed clearly or prominently. Scam lenders may say you've been approved for a loan, then call or email demanding a fee before you can get the money. Any up-front fee that the lender wants to collect before granting the loan is a cue to walk away, especially if you're told it's for 'insurance,' 'processing,' or just 'paperwork.' Legitimate lenders often charge application, appraisal, or credit report fees. The differences? They disclose their fees clearly and prominently; they take their fees from the amount you borrow; and the fees usually are paid to the lender or broker after the loan is approved.
- The lender says they won't check your credit history, but still wants your personal information, like your Social Security number or bank account number? Go somewhere else. They may use your information to debit your bank account to pay a fee they're hiding.
- The loan that is offered over the phone. It is illegal for companies doing business by phone in the U.S. to promise you a loan or credit card and ask you to pay for it before they deliver.
- The lender uses a name that is similar to a real bank's name. Crooks give their companies names that sound like well-known or respected organizations and create websites that look professional. Some scam artists have pretended to be the Better Business Bureau, a major bank, or another reputable organization; some even produce forged paperwork or pay people to pretend to be references. Always get a company's phone number from the phone book or directory assistance, and call to check they are who they say they are. Get a physical address, too: a company that advertises a PO Box as its address is one to check out with the appropriate authorities.
- The lender who is not registered in your state. Lenders and loan brokers are required to register in the states where they do business. To check registration, call your state Attorney General's office or your state's Department of Banking or Financial Regulation. Checking registration does not guarantee that you will be happy with a lender, but it helps weed out the crooks.
- The lender asks you to wire money or pay an individual. Don't make a payment for a loan or credit card directly to an individual; legitimate lenders don't ask anyone to do that. In addition, don't use a wire transfer service or send money orders for a loan. You have little recourse if there's a problem with a wire transaction, and legitimate lenders don't pressure their customers to wire money.
Finally, just because you've received a slick promotion, seen an ad for a loan or credit card in a prominent place in your neighborhood or in your newspaper, on television or on the Internet, or heard one on the radio, don't assume it's a good deal ' or even legitimate. Scam artists work hard to make you think they're legitimate, so it's really important to do your homework.
How to Handle Debt
If you have debt problems, try to solve them with your creditors as soon as you realize you won't be able to make your payments. If you can't resolve the problems yourself or you need help to do it, you may want to contact a credit counseling service. There are Nonprofit organizations in every state that counsel and educate people and families on debt problems, budgeting, and using credit wisely. Often, these services are free or low-cost. Universities, military bases, credit unions, and housing authorities also may offer low- or no-cost credit counseling programs.
And please let us know about any suspicious calls or emails you receive. We look for patterns so that we can alert the authorities and victims to new scams, before it is too late!