Common Signs of a Bad Credit Loan Scam

By Angela Monroe - July 2, 2019

A bad credit loan is typically your last financing resort if you have a poor credit score. For an interest rate that’s higher than standard consumer loans, it lends you money even though you have a history of debt mismanagement and are likely to mess up your loan obligation yet again.

On the other hand, scammers often use a bad credit loan to lure victims. Your dire need of acquiring financing makes you vulnerable not just to loan predators but also to those who simply want to get a hold of your money. 

To avoid falling victim to a bad credit loan scam, always be on the lookout for these common signs:

Upfront Fee

This is also disguised into other names, like “loan origination fee”, “loan application fee”, “document fee” or “loan insurance fee”. However, they all mean the same: Your loan application won’t get processed unless you send some money. This dishonest scheme puts you in an inconsistent position of providing money in order to borrow money.

On the contrary, a legitimate bad credit loan lender discloses all their fees and deduct them from the loan amount you receive instead of demanding money up front. They typically require a large down payment to secure the loan, but this amount is subtracted from the total cost of your loan. The bigger your down payment is, the smaller your monthly repayments will be.

Worst, a scammer can run away with your “upfront fee”. By the time you realized what’s going on, your supposed lender is nowhere to be found​.

Wire Transfer

If the lender asks for any fee via an electronic money transfer service, it’s a big cause for concern. Loan scammers often use electronic money transfers, like FX and TransferWise, to collect money from their victims because they can get the funds almost immediately and the transactions are difficult to trace. 

When dealing with a bad credit loan lender, always ask for their physical address and research about their business online. You can also contact the Australian Securities and Investments Commission (ASIC) to verify if they are a legitimate business.

Personal Information

Beware of a bad credit loan company or lending institution that asks for your personal information, like social security number, date of birth and bank account number without verifying the legitimacy of their business. 

Scammers may not be interested in your upfront payment but they could be after your personal information, which is used to steal your identity and your bank account. Always proceed with caution and ask for any written documentation on the loan before getting “personal”.

Additionally, do not give out sensitive information over the phone, especially if you did not initiate the call or you don’t know who’s on the line and are not familiar with the business they represent. Do not also accept any loan offers over the phone because this is illegal. Legitimate loan offers are always put in writing and mention all associated fees.

Suspicious Business Identity

Scammers often lure their prey on the internet, where it’s easy to stay anonymous even when doing business. To appear legitimate, scam lenders have their own websites and social media pages. They may also have business names that sound genuine. 

Before dealing with a lending company that you have not done business with in the past, it’s smart to first check them in the Australian Securities and Investments Commission (ASIC) or Better Business Bureau. See if their business address and contact details are authentic. Avoid doing business with one that uses a Post Office box address as their business mailing address and those that can be reached only through an answering machine or with a call centre operator.

When navigating through a suspicious company’s website, refrain from clicking any links. You could be redirected you to counterfeit sites. Worst, the links could infect your smartphone or computer with a virus. Unless you’re sure about a business’ legitimacy, never send your personal information through their website or in response to an online or telephone request. Its real purpose may be for identity theft.

Check with the financial regulation office if a lender is registered in the state where they do business. This can greatly help you identify a crook.

Terrible Customer Reviews

Do not do business with lenders with poor customer reviews on Trustpilot, the Better Business Bureau and other sites that specialize in lending reviews, as well as on the Facebook business page. 

While it’s common sense to take all reviews with a grain of salt. However, lenders that consistently get bad reviews may have made an unfavourable impression with many clients. Worst, they could be involved in fraudulent schemes that take money away from their customers. Consider these bad reviews as a warning. Avoid these poorly rated lenders and look for those that have excellent customer review ratings. It’s better to be safe than sorry.

Other Red Flags

There are several things that should prompt immediate concern:

  • The text and email messages and other correspondence contain spelling and grammar errors. This reflects a poor grip of the English language and lack of professionalism.
  • The loan offers have a free period (several months or years without payments). This is simply not how lawful financing works.
  • Lenders don’t do credit checks and will simply lend you money. Even if you’re applying for a bad credit loan, an honest subprime loan provider still checks your credit history. This is to calculate the interest rate and terms of your loan based on your credit profile.

 

Loans For People With Bad Credit have more than 30 partner lenders and over 35 years of experience in the business. We help people across Australia get bad credit loans at reasonable interest rates and terms. Know the right financing for you by completing our Bad Credit Loan Pre-Approval or call us on 1300 769 384.

Angela Monroe
Angela Monroe is the Community Manager at The Positive Group, specialising in giving people the information that they need when they need it, and putting you on the path to a fair financial future. She has 8 years of experience in helping Australians find the right finance solutions, and regularly contributes articles to empower Australians with the knowledge they need to become financially healthy.

Comments

No comments yet.

Leave a comment.

  • Quick Quote

  • Related Posts