Living in the modern world, we tend to think we’re pretty savvy. None of us would send all our money to a Nigerian prince online. We won’t put our login details into any old page. Even in foreign countries, we’re more attuned to the scams opportunists are looking to play on tourists. There’s no need to worry about being scammed, right?
Unfortunately, the truth is far less simple. Scams have evolved a lot, and although some scammers haven’t kept up, those who have could catch most people out. They’re smartly crafted and use techniques you wouldn’t expect.
Certain scams, however, work because of the scenario. A particularly common example is the loan scam. Loan scams work for a number of reasons. For one thing, a person applying for a loan may feel desperate and won’t stop to count the red flags. This is particularly true for those who’ve previously been denied a loan. They’ll give the benefit of the doubt to options they’d never have looked at before.
What’s worse is that not all loan scams are illegal. Some use legal means to get you into debt you can’t get out of. You get stuck paying interest into a never-ending void.
There are some great loan possibilities, even for those with bad credit. As a business owner, you can get a commercial mortgage, small business loan, or simply a personal loan that you can use for whatever purpose you choose. The benefits of getting a good loan from a reputable company shouldn’t be tarred by the prevalence of scammers and predatory companies.
However, watch out for scams that use these techniques.
Some scammers get money from people desperate for a loan by asking for an upfront fee. They’ll give you a story about needing money to cover the admin costs to start the process. But since they’re supposedly giving you a loan, they could simply take this money from the value if they needed to. Never send upfront fees for a loan, no matter how attractive the terms look.
No credit needed
There are some companies that are willing to give reasonable loans even if you have a bad credit score. However, any company that tells you your background doesn’t make a difference is lying. Any responsible lender will check your credit score. They may calculate your level of risk based on other factors, but they won’t hand out money without this information first. These loans are scams you need to avoid.
If a lender ever asks you to wire money for fees, don’t do this. No reputable lending company will ever ask you to wire money. This is almost certainly a sign of a loan scam. No matter how many rationalizations you can come up with, avoid these loans.
Some loan scams use phishing techniques. They pose as other reputable companies in order to get you to give them personal information, including credit cards and bank accounts. They then use this information to steal from you, taking your money, identity, or both. Always check that you’re on the real website of the company you think you’re dealing with. Double-check the spelling of the URL and look up the site independently to make sure.
A good way to weed out scams is to read the reviews of a loan company. At least, this should be the case. Unfortunately, many scam companies write bad reviews and use SEO techniques to push all of the negative reviews off of the first page of Google search results. Make sure that any reviews you see come from a reputable website that independently vets the reviews for scams and bots.
Some types of loans from banks and reputable lenders may as well be scams. They’re designed for the purpose of making as much money as possible, regardless of what it does to their customers. Stay away from the following legitimate types of loans.
Payday loans are the quintessential example of predatory lending practices. By giving you the attractive proposition of borrowing money just until you get paid, it seems like nothing could go wrong. Then, you pay so much on interest that you need to take another loan. Eventually, all you’re paying is interest and you’re in debt you don’t know how you’ll ever escape.
Car title loan
These loans use your car title as collateral and you can borrow up to 50% of your car’s value. However, while this seems attractive, you need to pay it back in one lump sum. That sum will immediately accumulate a huge amount of interest. And if you miss your payment, the company will take your car. There is too much risk for a loan that will, at best, cost you around 25% of the amount per month.
When you need a loan, you might feel particularly desperate. However, you should always take a breath and reconsider any loan agreement you are about to sign. There are too many scams that will rob you of your money and too many legitimate loans that will only end with you in much worse debt.