Personal loan scams are nothing new, they’re just now conducted mostly online. The anonymity of the internet allows for cybercriminals to post as loan officers and claim to offer loans even when they don’t have a license to do so.

The scam goes something like this:

You receive a phone call, email, text message, or some other form of communication letting you know that you’ve been approved for a personal loan of $5,000. You start to think about all of the things you could do with this money – pay off credit cards, lower student debt, fix up your car, the list is almost endless. You contact the “loan officer” back and they send you an electronic application. The application process is extremely quick and takes less than 5 minutes, with no credit check, nothing, just the application. You return your application to the “loan officer” and expect to be able to ask some questions about the terms and the lender.

From here, the scam usually goes one of two ways:

#1: The “loan officer” doesn’t answer any of these questions, instead, they request that you send money upfront to start the loan. Not just $20, they’re looking for upwards of $1,000 to begin the loan. They tell you the interest rate is astronomically low, like 0.03% APR for the entire term of the loan. You get together the $1,000 to start the loan, then the “loan officer” disappears with your money.

#2: The “loan officer” doesn’t answer any of these questions, instead, they push you to enter into the contract term agreement for the personal loan. Once they’ve hounded and pushed you to take this loan, you’ll find that the terms of the loan weren’t what you signed up for. The “loan officer” will create terms that are nearly impossible to meet, which will then hit you with fees and interest so you’re never able to pay off the loan balance.

What are the red flags of a personal loan scam?

#1: Unprofessional communication.

If the person you’re speaking to about the personal loan communicates with you in an unprofessional way, such as through an unsolicited text message, or social media platforms, or uses improper spelling and grammar, this is a sign of a personal loan scam. Similarly, if the person evades answering your questions or cannot provide concrete answers, this is unprofessional and should be a red flag.

#2: They ask for payment upfront.

If they ask for money upfront, it’s a red flag. This means they are trying to get money from you without giving you the loan yet.

If you don’t have the loan yet, why are you sending them the payment for it? If they want money from you before they give you the loan, this is a sign that they may be running a personal loan scam.

Similarly, if they only allow for payment to be made in a nontraditional way such as gift cards or prepaid cards, this should be seen as a personal loan scam. No legitimate personal loan officer will accept loan payments in gift cards.

#3: They want more personal information than is necessary.

While some personal information is needed to get a personal loan, be careful not to give out more than is necessary. If someone asks you for more information than is needed, this is a sign of a personal loan scam. They’re looking for not only your money but more information about you that they can potentially exploit.

Note that scammers may not ask for your name or address up front (in fact, those are the pieces of information they’ll often demand last). They might just ask for the basics: how much you want and when you will need it.

#4: The interest rate is TOO good to be true.

A low-interest rate is not a red flag in itself, but if the interest rate is too good to be true, this should be a sign of a personal loan scam. Some lenders are able to provide extremely low-interest rates, but this isn’t very common. Alternatively, if the APR is not listed or the person cannot provide the APR, this is a sign of a personal loan scam.

#5: They don’t want to do a credit check.

If a loan company is asking you to pay the money upfront and they say they will do a credit check after, have your radar on high alert. If they don’t want to do a credit check, it’s a sign that either they are running a personal loan scam or they are not legit. It’s essential for lenders to do a credit check to assess the risk. A low credit score is seen as a big risk to lenders, offering a loan to a risky client is not in their best interest and should be a red flag.

A lender offers easy approval despite a low credit score. A low credit score is seen as a big risk to lenders, offering a loan to a risky client is not in their best interest and should be a red flag.

#6: No online presence.

If you’ve never heard of the lender, if they have no online presence, no website, and no reviews, this is a red flag of a personal loan scam. While new lenders open up all of the time, they will always have an online presence in some way—it’s something that is expected from them from both consumers and the regulatory agencies that oversee their operations.

#7: You get an email out of the blue.

Unsolicited emails are a popular way for scammers to trick you into their traps. If you get an unsolicited email telling you that you’re eligible for a personal loan, this is a scam. Especially if you didn’t apply for the loan in the first place, the email is a personal loan scam. The email could be from anyone—it could be from a legitimate bank or financial institution, or it could be from a fake one.

Scammers send out millions of these emails every year, and they’re becoming increasingly convincing. They know that most people don’t read all the fine print on the ads they see around them, and these scammers are aware of how easy it can be to get someone to click on something in an email without really thinking about what they’re doing.

Personal loan scams happen every day. The best thing you can do to avoid them is to be informed. With these red flags in mind, you can identify the scams and make educated decisions about whether or not to take a personal loan from a lender. The reputable lenders will be willing to work with you on everything from the interest rate to the timing of your repayments, so there should be no reason for them to push for quick decisions or demand an upfront payment. The important thing is not to ignore these red flags—they could be the difference between losing your hard-earned money and getting a legitimate loan that meets all of your needs.

If you’ve been the victim of a personal loan scam or any other online scam, Active Intel Investigations is your professional resource for online scam investigation and asset search investigation. Learn how we can help investigate your case or check out our YouTube channel for professional investigative resources.

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