Whether it is growing a business or just for personal needs, loans are very important. Years back, there were no digital means of lending money, and lenders offered loans with higher interest rates and late fees; the lending methods were not ethical. However, with the introduction of digital methods of lending, like online personal loan, traditional lenders have been reduced. But, this could also mean one thing – many predatory lenders entering the market.
What matters is protecting yourself from loan scammers. However, it can be difficult if you cannot identify a predatory lender at a glance. Many face this challenge when borrowing money. Studies show that consumers lose billions of money to fraud every year, and this includes scams in the money lending sector. Loan scammers usually target your personal information and financial details. They pretend to be legitimate lenders to easily acquire these details. Therefore, learning how to identify scammers and protect yourself can be a significant step in ensuring your financial security in the future.
How to Identify Loan Scams and Predatory Lenders
Loan scammers are basically people or a company that uses dishonest means to acquire borrower’s information. These scammers pretend to be legitimate lenders that offer loans on pretenses. They deceive borrowers by using fake company logos, names, or ID numbers of reputable and legit lending companies. They impersonate the lender to gain the trust of a borrower. Their main aim is to scam and then collect personal details as well as their financial details, including the bank account or a PAN, to commit fraud. If you are a victim, you may suffer dire consequences like identity theft or even financial losses.
Essentially, these scammers may send text messages, letters, or unsolicited calls to borrowers, encouraging them to sign up for the loan. In the end, they can even pressure you by promising their loans are available for a limited time, so you need to apply quickly. Their main aim will be to get their hands on your financial and personal details.
To add to that, some predatory lenders may trick you into applying for loans with high interests and hidden fees. Predatory lenders use a common tactic of promising guaranteed approval for your instant personal loan without checking your credit score and history. Also, you may notice others asking for upfront charges before you can proceed. This happens before you even check the paperwork and other services.
How to Avoid Loan Scams and Predatory Lenders
Understanding the warning signs is key in helping combat loan scammers. Learning how to protect yourself and doing what is required while securing your personal loans is the way to go when you don’t want to be a victim of a scam.
Beware of quick loan schemes
Perhaps you want money quickly to pay for an emergency, but you cannot get the loan. Predatory lenders can take advantage of your situation and lure you through quick loan schemes. A lender may persuade and pressure you to apply for the loan as soon as possible without giving you time to go through the terms and conditions of the loan.
Not checking the conditions of the loan is risky. It is in this section you will find the hidden charges and other fees. Failure to check them will lead to issues in the future.
You should avoid a lender pressuring you to apply for the loan quickly. Being pressured to acquire the funds despite being the one in need is a red flag.
➢ Check internet presence
The internet presence of a lender also matters. If you are using an app to get loans, make sure you check the app’s authenticity and reviews. You can get the help of an expert. Predatory lenders will use unethical techniques in amount recovery. In the end, it will bring trouble to the borrower. Therefore, before you apply for a loan, check if the personal loan app you are using is authentic and if there are reviews from other people who used it.
➢ Check if the lender takes into account credit scores
Most loan scammers will lure borrowers with their loan schemes that do not factor in credit scores or credit history. It could be a convenient way of securing funds, especially when you don’t have good credit, but the truth is entirely different. It is a way to lure you to apply for a loan.
Reputable lenders must always check your credit history to know the type of borrower you are. Credit scores play an essential role in loan approval. It is proof of your repayment capability and the past record.
Schemes that don’t involve credit history and credit score may be a trap. Be sure to check if the lender considers credit scores before giving out loans.
➢ Check fee details and if they’re mentioned properly
You will find some lenders not offering the exact fee details and when you fall into their traps, that’s when they charge you a high rate and high late fees. The lender who doesn’t provide the fee details may be a predatory lender. Therefore, be cautious not to be a victim.
Before you apply for a loan, check for the interest rates, fees, and terms & conditions.
➢ Don’t pay upfront fees
Being asked to pay a certain amount before you get the loan is a red flag. Legitimate lenders don’t charge borrowers any money as upfront fees before granting the applicant’s request. They are always transparent in their lending process and strategies.
➢ Don’t give out your personal details
Some of the most targeted details scammers look for are bank account details or the PAN. When they get hold of this information, they can cause major loss especially to your identity and your finances.
Conclusion
Loan scams and predatory lenders are on the rise nowadays. With the introduction of digital lending and many unregulated personal loan app, so much is at stake. However, understanding the warning signs will help you protect yourself from scams. Remember, when a deal is too good, think twice. This applies to loan offers that may sound and seem more alluring.
