Personal Loans
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LendingTree is compensated by companies on this site and this compensation may impact how and where offers appear on this site (such as the order). LendingTree does not include all lenders, savings products, or loan options available in the marketplace.

Personal Loan Scams: 5 Warning Signs

Updated on:
Content was accurate at the time of publication.

When it comes to personal loans, there are plenty of legitimate lenders and services available. Unfortunately, there are also scammers looking to take advantage of consumers. In 2022, scammers stole nearly $8.8 billion from Americans, according to the Federal Trade Commission (FTC). To protect yourself from any future headaches, it’s important to be on the lookout for common warning signs of personal loan scams.

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Personal loan scams can be challenging to identify because there are many types of scams that target consumers. Often, these scams aim to access valuable personal information about you like your Social Security number or credit card number. Scams can also include trying to access your bank accounts, charging sky-high interest rates and fees or making you pay for a personal loan you’ll never have access to.

Let’s look at red flags that can help you spot personal loan scams.

1. The lender asks for fees upfront

A reputable lender won’t ever ask you to pay an upfront fee to access personal loan funds or to review personal loan paperwork. If a lender does ask for payment before you access your loan funds, this is almost always a sign of a scam.

This is how personal loans work: When you pay back a personal loan, you do so in the form of monthly payments. You will make steady progress on paying off the principal balance and the interest charges.

2. The lender guarantees you’re approved before you apply

An advertisement of guaranteed approval for a personal loan is another sign that a lender may be looking to take advantage of you. Generally, personal loan lenders have a handful of requirements that borrowers need to meet to receive approval for a personal loan. Your credit history, income and many other factors have to meet a certain level of standards for a lender to feel comfortable issuing you a personal loan.

There are personal loan products on the market that make it possible for consumers with low credit scores to get a personal loan, but even those loans have standards that must be met. A promise of guaranteed loan approval is often a sign of a subprime loan or a total scam.

3. The lender promises to clear your debt

If a deal sounds too good to be true, it often is. A common example of a personal loan scam involves promising to clear your debt. This is done by claiming to collect debt payments in order to help you pay off an existing source of debt.

Steer clear of these offers and instead work directly with your lender to see what options you have for making faster progress on debt repayment.

4. The lender isn’t registered in your state

If a lender isn’t registered in your state, they can’t legally offer you a personal loan. They have to register in the states where they operate their business. Before agreeing to any loan offers, double-check that the lender is registered in the state you reside.

You can do this by contacting your state attorney general or banking or financial services regulator. You can find out how to contact your specific state’s bank regulator here.

5. The lender calls you with an offer

A reputable personal loan lender generally doesn’t advertise their services by cold-calling consumers and making them a loan offer on the spot. Whenever a lender reaches out to you first, this can be a sign of a scammer trying to gain access to your personal banking information.

It’s best practice not to respond to lenders or financial institutions who make you an offer by phone, door-to-door solicitation or via mail. It’s actually illegal for a loan issuer to offer a loan over the phone.

A personal loan is a really helpful financial tool, so don’t let potential scams scare you off from borrowing money for that gorgeous kitchen remodel. When it comes time to apply for a personal loan, these are some steps you can take to find a reputable loan lender.

  • Confirm the lender is registered in your state: You can contact your state attorney general or the state’s banking or financial services regulator to confirm if a lender is registered in your state. Remember — they can’t legally issue a loan if they aren’t registered to do business in the state you live in.
  • Read the lender’s online reviews: When looking for the best place to get a personal loan, feedback from other borrowers can help you get an idea if a lender is trustworthy or not. Check out Better Business Bureau (BBB) reports or other official ratings and read reviews online to learn more about customer experiences.
  • Investigate the lender’s online presence: Does the lender have a website that is easy to access? Does that website easily provide the information you need to make a decision about a lending product? If the lender doesn’t have a professional website with accurate contact info on it, that’s a sign to walk away.

If you suspect you were involved in a personal loan scam or that a scammer tried to target you, there are steps you can take to report the personal loan scam.

  • Contact any companies involved: First things first, if you gave money to the scammer quickly contact any companies you worked with to make the payment like your bank or credit card company. If you can, cancel any payments and ask for help securing your accounts.
  • File a police report: You also need to contact the police and file a report. It’s important to request a copy of the police report to keep on hand for proof of the incident.
  • Keep an eye on your credit: If the scammer has access to identifying information about you that they can use to open credit accounts in your name, this can seriously damage your credit score. Sign up for credit monitoring or consider freezing your credit to avoid fraudulent behavior.
  • Create a report with the FTC: To help stop the scammer from harming other consumers in the future, file a report about any suspected personal loan scams with the FTC.

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