Common Loan Scams to Look Out For

There is nothing worse than losing money to unscrupulous business practices, and where borrowers are concerned there are some common loan scams to look out for. These scams can leave the borrower out of pocket with little hope of recovering their losses.

The Up Front Fee Scam

The up front fee scam has become very popular and many borrowers are being duped by this method. Basically it involves borrowers receiving letters from companies claiming to find loans for desperate borrowers. The company will target borrowers who have been turned down for loans by other lenders.

These companies will charge an up front fee with the promise that they can arrange loans for the borrower. Once the fee has been paid they will simply send a list of high interest lenders or will say they cannot find a loan suitable for that borrower. When borrowers telephone to complain they will find they are using premium rate telephone number that only adds to their debts.

Approved Loan Scams

Another common loan scam to look out for is the pre approved loan scam. These loan offers can usually be found in newspaper adverts or through emails sent to the person looking to borrow money. The companies will usually use advertisements with claims such as “bad credit history not a problem” and “fast cash loans today”. Most of these pre approved loan scams will come from companies based abroad.

Once the borrower telephones the company and has given details they are told the loan is pre approved but they will need to supply an insurance fee. This will usually be around 10% of the loan amount. The borrower will need to wire the money to the loan company. Once the money has been sent the borrower will not hear from the company again, and will have lost their initial fee.

Loans from Abroad

Any borrower should be wary of loan offers from countries other than the one they are resident in. Loan scams from abroad are very common and once the scams have occurred the chances of recovering any money paid will be very slim. There are many people who have been scammed out of thousands of pounds by applying for loans abroad when they have been turned down in the UK.

The Deferred Payments Scam

Another common loan to look out for is the deferred payments scam. The loan company will tell the borrower that a small arrangement fee will be taken but the customer does not have to pay this until the end of the loan. Unknown to the customer this arrangement fee is amassing huge amounts of interest throughout the loan period. By the end of the loan this fee can have escalated into thousands.

Spotting the Scams

Common sense should send out signals that if a loan looks too good to be true it usually is. Borrowers should always be wary of lenders that claim they are uninterested in credit checks or bad credit histories. Even if these loans are not officially scams they will still charge massive rates of interest and additional fees.

Unsolicited Loan Offers

Borrowers should always be wary of any loan company or broker that charges up front fees before any loan has been arranged. It is almost impossible to recover these fees once they have been paid. Unsolicited offers of loans, either by post or through emails should also be avoided. These companies have obtained the borrower’s personal details from other companies that have turned the borrower down for normal interest loans.

Companies that perpetrate common loan scams will prey on borrowers with bad credit records who have been turned down elsewhere. Desperate borrowers will sometimes overlook the loan scam warning signs in the hopes of obtaining loans. Borrowers should always read all contracts before signing, never pay up front fees, and if in doubt should walk away from the loan offer altogether.