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8 Warning Signs of Personal Loan Scams

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Personal loans can be a big help if you’re looking to cover an unanticipated expense. However, you must make sure you’re working with a legitimate lender and not a scammer looking to take advantage of your situation. If a lender approaches you first, doesn’t require a credit check or gives you an offer that’s too good to be true, you could be facing a personal loan scam.

Scammers can be hard to detect, whether they’re out to steal your money, your identity or both. Before you sign on the dotted line, look for these eight red flags of personal loan scams.

8 key warning signs of personal loan scams

1. The lender requests fees upfront

Scam artists often ask borrowers for an upfront fee before a personal loan is disbursed. They will also give confusing answers about the loan’s terms and costs. If someone asks you to pay for “insurance,” “paperwork” or “processing,” you should exercise caution. Still, keep in mind that some upfront fees are valid, like the origination fees legitimate lenders often deduct from a loan before the borrower receives the remainder.

According to the Federal Trade Commission, consumers reported losing more than $1.9 billion to fraud in 2019, with about $667 million going to imposter scams.


Get a clearly itemized list of fees and costs associated with the loan.

“Consumers should be active and ask questions if there’s something they don’t understand,” said Evan Zullow, an attorney with the Federal Trade Commission’s Division of Financial Practices.

The FTC emphasizes that lenders should display their fees clearly and prominently. This can include origination fees, as well as fees for appraisals and credit reports. These fees are typically paid to a lender only after a loan has been approved.

2. The lender is not registered

The FTC requires lenders and loan brokers to register with the attorney general in the state(s) where they do business. If you can’t find your lender on a government registry, it’s likely you’re dealing with a scammer.


Verify that the lender is registered in your state before proceeding with a loan application. You can do this by checking the website of the National Association of Attorneys General and looking for the office of your state attorney general.

You may also check online at a site for your state’s department of banking or financial services. Keep in mind that being registered doesn’t mean you’ll like the lender, but it does mean the lender has passed background checks and isn’t a criminal.

3. The lender does not require a credit check

Some lenders make it plain they don’t care about credit checks, which is why the FTC cautions borrowers to watch for phrases like “Bad credit? No problem,” “Get money fast,” and “We don’t care about your past. You deserve a loan.” A loan’s terms are almost always dependent on your credit history and credit score, and a legitimate lender wouldn’t offer a loan to an applicant without first understanding their ability to pay the loan back.

Be especially wary if the lender won’t check your credit but wants personal information, such as your Social Security number or bank account number. This could be a scam to debit hidden fees from your account.


Look for legitimate lenders and banks who check your credit before they make a firm loan offer. If the lender doesn’t, it’s probably a scam.

4. The lender requests unusual forms of payment

Payments for loans should always be made to the lending institution. If your lender asks for an unusual form of payment — like a gift card, or a payment made directly to an individual — don’t do it.

Similarly, be on the alert to lenders who ask you to wire them money for a loan, as it can be impossible to get money back from a wire transfer. Borrowers should never wire money as part of a loan transaction, said Zullow, nor should they make a transaction that feels strange or uncomfortable.


Look for lenders who allow automated debit, online payments, payments over the phone and/or checks mailed to the lending institution. A legitimate lender will make the process clear, and you should have no questions about how to make loan transactions.

5. The lender solicited your business

Legitimate lenders do not solicit business by cold-calling potential customers, sending them letters or coming to their door. In fact, according to the FTC, it’s illegal for companies that do business in the U.S. to call potential borrowers and ask them to make a payment on a loan or credit card before it’s delivered.

If a lender reaches out to you first, whether it’s in person or online, they may be a scammer trying to get your confidential banking information — don’t give in to their hard sell.


If a lender does reach out to you, it should be because you contacted them first, whether through an online inquiry, a phone call or a visit to a bank branch.

6. The lender is pressuring you to sign

Feeling rushed? If so, you may be dealing with a scammer. Undue pressure could come in the form of “urgent” offers that expire in a few hours or the lender asking you to start the loan paperwork before you’ve fully talked about the loan’s terms and costs.

Financial institutions typically offer personal loans with consistent rates and terms. Although lenders may offer limited time promotions like waiving certain fees, such offers are usually extended to all applicants for a specified time and not just a few hours, so potential borrowers can take time to comparison shop.


Choose financial institutions that offer promotions and personal loans with consistent deadlines, rates and terms for all borrowers. Legitimate lenders won’t pressure you to take out a loan or give you an “offer” with a deadline that’s specific to you.

7. The lender has no physical address

One way to figure out if a lender is legitimate is to check whether the business has a real address. Call the phone number on their website to confirm it’s their business, and look up their address on mapping software. If it’s a P.O. box or the address of a P.O. box service, the lender likely is a scammer.


Find a lender that has a physical address listed somewhere on their website.

8. The lender’s website is not secure

Lender websites can be tricky, as fraudulent businesses will try to fool you with names and logos similar to those of real businesses and create websites that look professional. If you enter personal financial data into a scam website, it could be used to steal your money.


Look for a padlock icon where the web address appears in your browser to ensure the validity of that website. This symbol, along with an “https” in the web address, indicates that the website has been certified as secure and likely has not been hacked.

If you’re still not sure, research the company online. “Any sources of information about the reputation of a company, through third-party online sources, [can be helpful],” said Zullow.

Additional warning signs of personal loan scams

So far we’ve focused on eight of the most common red flags that might be a tip you have personal loan fraud on your hands, but there might be other signs, too. Keep the following red flags in mind as well as you comparison shop for lenders:

  • Negative consumer reviews and ratings are consistent across multiple online platforms
  • Company email addresses are inconsistent with the name of the lender (for example, an email that ends with
  • Correspondence from the lender is filled with spelling and grammatical errors
  • A lender asks for a prepaid debit card or another untraceable form of payment as collateral

What to do if you think you’ve experienced personal loan fraud

If you think you’ve been scammed, file a report with your state’s consumer protection office and the local police. You can also file a complaint online with the FTC or via 1-877-FTC-HELP. You’ll be asked to provide your name and contact information, how much money you lost, how you were contacted and any details you know about the fraudster and why you think you were scammed.

It’s also important to protect yourself against future personal loan scams, as well as identity theft. Here are the measures you should take:

  • Regularly review transactions on your credit reports from the major credit bureaus (Experian, Equifax and TransUnion)
  • Notify all the banks and financial institutions you deal with that you could have been exposed to a scam and, if possible, replace your bank cards with new ones
  • Add fraud alerts or credit freezes to your accounts

How to find legitimate loan companies and personal loan offers

To find legitimate loan companies, your best bet is to search directly on the official websites of banks, credit unions and online and peer-to-peer lenders. You can also fill out an online form on Lending Tree that acts as a handy comparison shopping tool, matching you up to five personal loan lenders depending on your creditworthiness.

Rebecca Safier contributed to this report.


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