The Truth About Advance-Fee Loan Scams
Advance-fee loan sharks prey on unwary consumers, taking their money for the promise of a loan, and leaving them ripped off. The scam artists often impersonate legitimate lenders to entice consumers. They then proceed to rob them with their bogus offer.
According to consumer protection agencies, ads and promotions for advance-fee loans suggest — or even “guarantee” — that there’s a high likelihood that a loan will be approved, regardless of . But to take advantage of the offer, the consumer has to pay a fee. The catch? The scam artist takes off with your fee, and the loan never materialises.
Many advance-fee loans are promoted in the classified sections of daily and weekly newspapers and magazines. Typically, the ads also feature free phone numbers. The loans also are promoted through direct mail.
Legitimate loans do not require an up-front payment. Although legitimate lenders may charge application, appraisal, or credit report fees, the fees form part of the amount borrowed. They are not handed over before the application has even been assessed.
Legitimate lenders may guarantee firm offers of credit to “credit-worthy” consumers, but they will always evaluate the consumer’s creditworthiness and confirm the information in the application. Never will they simply hand out credit in return for a fee.
Often, advance-fee loan sharks claim that their fees will be used to pay for credit insurance. Sometimes, they even fax materials using stolen or forged logos and letterheads from legitimate companies. These materials are counterfeit documents not worth the paper they are written on. What’s worse, some scammers then use the information they collect to commit identity theft.
Consumer protection agencies say you can avoid being taken by advance-fee loan sharks by following a few important tips:
- Don’t pay for the promise of a loan. Especially over the phone.
- Ignore any ad — or hang up on any caller — that guarantees a loan in exchange for a fee.
- Remember that legitimate lenders never guarantee or say that you will receive a loan before you apply. They always check your credit rating to assess if they want to lend to you.
- Don’t give your credit card, bank account, or personal details on the telephone unless it is with a company you know and trust.
- No legitimate lenders require you to make a payment for a loan, so do not pay one.
The best advice really is always make sure you know who you are dealing with and that you can trust them. If a deal sounds too good to be true then it probably is. Always ask yourself how can an offer be legitimate, does it make sense? And last but not least, if in doubt, don’t make the agreement.