A bad credit loan is a convenient and powerful payment tool for people who have low credit scores. Unfortunately, it also provides fraudsters an easy means for luring people into bad credit scams.
Here are some things you can do to avoid them:
Recognize the signs of a bad credit loan scam
Upfront payment via untraceable payment method: Does a lender ask for your money without showing an interest in your paying ability and completely disregards your income and credit history? It is a scam.
If the lender asks you for an upfront payment by wire transfer, put your guards up! Normally, lenders would ask for payment via bank deposits, credit cards and cheques sent through the mail. And, take note, bad credit lenders don’t usually ask for up-front fees; unless, it is a mortgage or a car loan–where you have to pay down payment or closing costs.
So, if a lender asks for an advance-fee and guarantees you loan approval without doing anything to at least guarantee that you are going to pay your loans, think again. While there are lenders that offer loans without a credit check, they still ask for some information that would give them an assurance of your paying ability.
Don’t give out your personal information that can be used by fraudsters. If they cannot present written documentation on the loan and asks for sensitive information via phone instead, don’t entertain them. Information such as your bank account number, credit card number, and social security number should never be given away to anyone, on the phone.
Questionable websites and loan conditions
Check the website and loan terms. Loan scammers have websites that outline the bad credit loans they offer. There are testimonials too. But, if they tell you that you can get a loan as long as you pay an upfront fee or by providing sensitive personal and financial information that can be used for identity theft, leave the website fast. While some bad credit loans sound legitimate, they probably aren’t. As long as there is a risk that they will steal your personal financial information, or will take money from you, in exchange for the bad credit loans they offer, you’re in danger.
Other warning signs of bad credit loan scams
- Grammatical and spelling errors on emails: Reputable lending institutions spend a lot of money on content to ensure that they carry out professional communications with their clients.
- Request for an upfront fee even before your loan is approved
- An interest rate which is extremely lower than the usual rate of legitimate lenders
- 1-year free period before you make payments. It seems too good to be true so it probably is!
Always check the legitimacy of a lender by asking questions about their company, their office address, and licenses. A lender who is not interested in providing you their information is probably hiding something from you—and that’s a red flag that it is an illegitimate lender.