12 Signs Of A Personal Loan Scam

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You might be in the market for a personal loan to pay for an unexpected expense like a car repair or medical bills. You may even seek a personal loan to consolidate your existing debt.

Unfortunately, not all personal loans are equal. While it is important to research personal loan options including fees, rates, and repayment terms, it is even more critical to determine if your chosen loan company is legitimate.

Even if you are financially savvy, you can fall victim to a personal loan scam. Educate yourself on the red flags so you can protect your identity and your money.

Scammers use several different tactics to take your money and run. Plus, you are more likely to be a victim if you have been denied a personal loan in the past.

Of the 3 million identity theft and fraud reports filed in the U.S. in 2018,  25 percent of those cases reported money was lost. And it’s important to note that we aren’t talking about a few thousand dollars. In 2018 alone, loan scams and fraud accounted for nearly 1.5 billion in US dollars.

Legitimate Personal Loan Companies

Apply for a personal loan to instantly get an online quote. These online lenders will give you a no-obligation rate in just a couple minutes without affecting your credit score.

  • Credible: This loan marketplace provides personal loans from $1,000 to $100,000. In just two minutes, you will get up to 11 quotes from lenders.
  • Upstart: With personal loans from $1,000 to $50,000, Upstart goes beyond your credit history. It will take your job history and education into consideration when giving you a rate.

12 Signs Of Personal Loan Scams

Protect yourself and your financial security by learning how to spot scams. Learn what you should look for in a legitimate personal loan company and how to proceed if you are a victim of a financial scam.

1. No Credit Check

Lenders make money by collecting interest on a personal loan. A top way they can judge whether or not you will pay them back is by viewing your credit history. Lenders may additionally request to look at your income or bank account(s). If a personal loan lender offers to skip this step or doesn’t require a co-signer when you have bad or no credit, this is a red flag.

Applying for a personal loan requires the lender to check your credit twice. They will do a “soft” inquiry first to make sure your application information matches. A soft inquiry does not affect your credit score. Once you agree to the lender’s interest rate offer, the lender will do a “hard” inquiry which can temporarily affect your credit score but it necessary to secure the loan.

2. Upfront Fees

Some personal loans add origination fees to the total loan. This is a small percentage that is taken from your original loan amount. Since this fee is rolled into the loan, you won’t receive the full amount you originally asked for. Lenders do this so you don’t have to pay them upfront to receive your money.

If you are new to personal loans, you might not realize the way they work. Personal loan scams often begin with a lender requesting money upfront. This is counterproductive since you have a lack of money in the first place.

Lenders are required to disclose all their fees upfront and not all personal loans have origination fees. Never send money to a lender to receive a loan.

3. Random Forms of Payment (Debit Card, Gift Cards, etc.)

Most people can recognize a personal loan scam in which money is needed upfront. Since money is scarce when you seek out a personal loan, it makes sense to hesitate before you send a stranger money to receive money.

Online lenders now use a different game plan. They often ask applicants to provide them with the applicant’s debit card information. They claim it’s only for collateral to ensure that the loan is paid back. Before you know it, they have zeroed out your bank account and went silent.

Never give out your bank account information or respond to a lender offers that require you to send them a wire transfer or store gift cards.

4. The Lender Calls You

A qualified lender should never call you to offer personal loans. According to the FTC, it’s illegal for a lender to offer loans over the phone that require an upfront payment.

Also, be wary of personal loan offers you receive in the mail and salespeople offering them at your doorstep.

5. High-Pressure Sales Tactics

A legitimate personal loan company will offer you loan options and leave it up to you to decide whether or not to act.

Common personal loan scams include high-pressure sales tactics that try to force you to make a decision, often within 24 hours. Never work with a personal loan company that makes you feel uneasy or feels untrustworthy.

6. Unregistered Lenders

All lenders are required by the Federal Trade Commission (FTC) to register their services in each state they do business in. Even if a lender is 100% online or a non-U.S. company, every lender must be registered to do business legally in the U.S.

The states the lender is registered in should be visible on their website. If the lender’s website does not state this information, you can call your State Attorney General’s Office (where registrations are approved) to verify the personal loan company you are researching. You can also find local scams by searching your State Attorney General’s website.

Look to see if the company is operating under its required bank charter. This information should be provided on the website or available via customer service.

7. No Physical Address

If you already have doubts about a personal loan company, the absence of a physical address could be the tipping point. Although this isn’t always a sign that a personal loan company is fraudulent, it’s best to steer clear of companies that only list a PO box or worse no address at all.

Google map the company address. Some personal loan companies list the address of an open field or empty lot.

Don’t be fooled by online-only companies. They should still meet all the requirements of a brick and mortar lender. By not using a physical address, a personal loan scam can be nearly untraceable.

8. Unsolicited Emails

Email scams are a popular way to play on people’s emotions since they think the email is specifically personalized for them. Unfortunately, these phishing scams collect unsuspecting victim’s sensitive bank account information and more.

Any email that promises a personal loan rate that is too good to be true is a scam. Another way to spot spam emails is to look for grammar and spelling mistakes.

Remember licensed personal loan companies rarely advertise through email. They often advertise on websites, social media, and TV.

9. Emails with Links or Attachments

Never click on a link or download an attachment in one of these emails. Always send it straight to your spam or trash folder.

Participating in these email scams can compromise your personal or financial information and even get your identity stolen.

10.Spammy Email Address

If you think an email you receive is from a legitimate personal loan, an easy way to verify this is to look at the email address from the sender.

For example, if the company is Your Best Personal Loan, the email address should include the company’s website URL, i.e. debbie@yourbestpersonalloan.com. If the email address looks like this xxyi@tekcs.eidk.com, chances are it’s a scam.

11. The Website is Not Secure

A website that is secure not only helps protect the company that owns the domain but can protect your privacy as well. Inputting information on an unsecured site can allow your information to be hacked or even sold.

Some scam websites can mirror legitimate ones making it difficult for the average user to identify if a site is secure or not. Only provide personal or financial information on websites that feature an “s” after the “Http” in the website address (i.e. https://). Both the added “s” in the URL and a padlock symbol signify that the site is secure.

12. The Request for Personal Information

If a lender reaches out to you first via phone, email, or in person, do not give them any personal information. Legitimate personal loan companies advertise in traditional media such as relevant websites or TV.

A customer representative from that lender should always be able to explain to you why they need any personal or financial information for your loan. If you have questions, ask the lender before providing the information or signing any loan paperwork.

I’ve been scammed. What do I do now?

While it may be embarrassing to be a victim of a personal loan scam, you should still report it. Think of all the people you could help by warning them of your mistake.

  • Report the scam. Contact the FTC, Internet Crime Complaint Center, your state’s consumer protection office, even the Better Business Bureau (BBB). For specific theft cases, you can contact your local police department and file a report.
  • Gather any financial or personal data that was provided to the scammer.
  • Check your credit reports for any unusual activity, and continue to check at least once per year.
  • If any unusual activity appears, place a fraud alert on that account through the financial institution. (This step will make it harder for scammers to open accounts in your name.)
  • Consider changing your online passwords that contain sensitive personal and financial information.

Unfortunately, you may never see the money that you gave to the scammer, but you can protect your financial future and identity by being aware of scams and choosing a good lender.

A Good Lender Can Be Recognized in the Following Ways:

  • Legitimate contact information. Do your research. A legitimate personal loan company should provide its state license number, physical address, a valid phone number as well as a contact name. All of the information should match public records.
  • Easy to reach customer service. Talk with a representative using the provided phone number. You should be able to speak with someone or leave a message and get a callback. The customer service team should be able to answer any questions you may have and even offer personal loan advice.
  • Runs your credit history. The lender should have an interest in your credit history even if they know you have bad credit. Your credit history provides the lender with the information they need to set the interest rate and understand your financial situation.
  • Provides personal loan terms in writing. All loan terms should be provided in writing so you can make an informed decision. They will also go over the terms should you have any questions.
  • Maintains a good reputation online. Google search the personal loan company’s name online to see if anyone has reported it as a scam. Online forums are a great resource for asking if anyone has information on the company or is a current customer.

Where to Find Good Personal Loans


Get personal loan offers in amounts up to $100,000 from up to 11 lenders in just two minutes just by answering a few simple questions.

Credible is an online loan marketplace, offering no-obligation quotes that don’t affect your credit score. Credible offers a Best Rate Guarantee. Under the guarantee, you will be paid $200 if you find a better rate with another lender (terms apply).


Along with your credit score, Upstart takes into consideration things like your education history, area of study, and job history when determining your rate. You can borrow $1,000-$50,000 and can check your rate online.

Check your rate without lowering your credit score. Upstart provides cash in hand within one day of your loan approval. Make the required payments or pay it off early, there is no pre-payment penalty when using Upstart.

Don’t be Afraid to Ask Questions

Always use common sense when applying for a personal loan. If it sounds too good to be true, it probably is. Research the company that you want to get a personal loan through. Contact their customer service if you have any questions before agreeing to any loan terms.

If your credit score needs work, consider working to improve it before seeking a loan to get a better rate if there isn’t an immediate need for it.

Personal loan scams and identity theft are on the rise. It’s not going away anytime soon, so don’t be an easy target. By following the above tips, you can avoid falling victim to this invasive crime.