Be Alert to Signs of Personal Loan Scams

Not sure what’s a scam or not? Here’s how to protect yourself online:

8 signs of a personal loan scam

  • No credit check required. Most legitimate lenders will check your credit to determine if you’re able to repay them: A high score means you repay your debts in full and on time. If a lender isn’t interested in seeing your credit score, be wary. A scammer typically doesn’t care about your creditworthiness because it’s after your personal information.
  • The lender isn’t registered in your state. States require lenders to register for a license. If you find a business isn’t licensed to operate in your state — even if it’s licensed in other states — don’t respond to its lending inquiries. You might have stumbled on a fraudulent website using a business’s name to make money.
  • Your loan offer is incomplete. The Truth in Lending Act requires all lenders to provide the complete terms of a loan, including the final cost of the principal plus interest, before you sign on the dotted line. If your offer lacks details, contains spelling or grammar errors or otherwise raises an eyebrow, it could be a scam.
  • You can’t find a physical address. If a lender doesn’t provide a physical address or contact information, put the brakes on your loan. Scammers make it difficult to get in touch later, thus avoiding any legal action you might want to pursue against them.
  • Your offer expires soon — and you must act now. If you’re faced with an “urgent offer,” you’ve likely found a scam. Legitimate lenders offer steady rates that depend on your credit. Pressure tactics are designed to drive you to act quickly, before you’re able to spot a scam in progress.
  • The loan requires payment up front. Loans demanding “processing,” “insurance” or even “origination” fees before approval are a scam. A lender asking for payment before it’s processed your application is a scammer looking for a quick buck.
  • You’re guaranteed approval. There’s no such thing as a guaranteed loan. For approval, a lender will typically check your credit and verify your information. Scammers lure you in with guaranteed approval so they can collect fraudulent upfront fees.
  • Asks for payment in the form a gift card. Paying a lender with a gift card is the same as paying with cash — once the money has been used, it’s nearly impossible to trace or get back. No legitimate lender will ask you pay with a gift card, and if your lender is pressuring you to do so, you should find a new loan.

How do you report loan scams?

The easiest way to have the authorities look into it is through your state attorney general’s office. The federal government maintains a database of state consumer protection agencies to help you get in touch with the proper authorities.

5 things to look for in a legitimate lender

Use these tips before signing a contract to be sure you’re dealing with an upstanding business.

  • It’s easy to contact. When you call or email a legitimate lender, you should be met with decent customer support that’s ready to answer your questions. The lender should also clearly display a physical location and its state licensing information online.
  • It’s website is secure. Look for a little padlock to the left your address bar to confirm the site is safe. Most lenders encrypt the information you send to it online with 128-bit or 256-bit SSL. If a lender doesn’t, move on. A great offer isn’t worth risking your personal info.
  • It runs a credit check. When you apply for a personal loan, you’ll typically get two credit checks: a soft pull to confirm you exist and a hard pull to see your history. If a lender doesn’t care about this important step in the process, it’s likely not legitimate.
  • Its loan terms are clear. A legitimate lender will provide a transparent contract outlining how much your loan is for, the fees you’ll pay, any potential penalty fees, your interest rate, the total interest you’ll pay and the final cost of your loan. It will also detail when you pay and your payment options. If your contract is incomplete, don’t sign it.
  • Reviews and ratings are available online. See what other people say online about this lender. With your research, ask: Are reviews positive or negative? What problems do customers report? Can you find information on the lender? If you can’t find anything positive — or anything at all — you could be looking at a scam business.

Identity theft or fraud

If you have been diligent regarding protecting your credit and identity but have still been the victim of identity theft or fraud, you can contact one of the three major credit bureaus to place a fraud alert on your credit reports, giving potential lenders and creditors a heads-up that someone may try to fraudulently use your identity to apply for a line of credit.

Here’s what you should know about the different types of fraud alerts and how to place an alert on your credit reports:

Types of fraud alerts

  • Initial fraud alert
    • Expires after 90 days
      • Once it expires, the credit bureaus will automatically remove it from your reports.
    • Extended fraud alert
      • Can last seven years and can only be placed on your credit reports after your identity has been stolen and you’ve filed an identity theft report with the Federal Trade Commission.

How to place a fraud alert on your credit report

  1. Contact one of the three major credit bureaus

You can ask for a fraud alert to be placed on your account with the three major credit bureaus — Equifax, TransUnion or Experian — by requesting the alert online or by phone.

Equifax Online or by calling 1-888-836-6351
Experian Online or by calling 1-888-397-3742
TransUnion Online or by calling 1-800-680-7289


You need to contact only one of the three main credit bureaus to place fraud alerts on your credit reports from all three. That bureau is required by the Fair Credit Reporting Act to then notify the other two credit bureaus of the alert.

  1. Request the right action

You can still open a new account with a fraud alert after the creditor does its due diligence and contacts you. A credit freeze, also sometimes called a security freeze, prevents lenders from checking your credit in order to open a new account. Since most lenders won’t open an account without checking at least one credit report, a credit freeze effectively can prevent new account openings.

  1. Obtain and review a free copy of your credit reports

You’re legally allowed to receive an extra copy of your credit report from each bureau after filing an initial fraud alert. With an extended alert, you’re allowed up to two free copies of your credit report from each credit bureau that placed the fraud alert for up to 12 months after the bureau placed the alert.

  1. Let the fraud alert expire or remove it early if it’s no longer necessary

You can let the fraud alert expire or request that the credit bureau remove it prior to its 90-day expiration if you no longer need it. If you remove the fraud alert early, you must notify each bureau on your own to have that bureau take it off your report.

  1. Renew the fraud alert or request a different type if necessary

After 90 days, you can renew the fraud alert if you wish. If you want, you can request an extended fraud alert, which can stay in effect for seven years. To do this, make sure you’ve created an identity theft report with the Federal Trade Commission. Don’t forget, sometimes certain credit reporting companies or creditors will also require a police report before filing an extended fraud alert.