People with less than stellar credit scores are, more often than not, picked out by companies that provide loans to high-risk borrowers who are predicted to default on paying the loan. The bad news is that these loans are typical scams meant to deceive you into giving money to the company instead of paying you the money.
It is not right for a company to guarantee you a loan in return for a fee. In fact, it is against the law. Take note that legitimate lenders do not ask for an upfront payment from borrowers to borrow a bad credit loan.
For a little help, here’s how you can avoid bad credit loan scams. Check it out!
How The Scams Work
Bad credit lenders normally guarantee to send you money solely after sending them cash to secure the loan. The fee could be as low as fifty dollars or a few thousand dollars, relying on the amount you are borrowing.
After sending the money, you will then need to wait for your loan. However, you never receive the money. Sadly, the fee you paid is no longer available by the moment you know what is going on and the bad credit lender is long gone.
Indications Of Bad Credit Loan Scams
The most evident and apparent indication of a bad credit loan scam is that the lender is asking for an upfront payment. Car loans or traditional mortgages need a down payment. However, this fee does not go directly to the lender.
The money goes to the seller. Thus, reducing the amount you need to borrow. What’s more, any authorized fees are usually put back into the loan. In other words, you do not need to pay these fees upfront. Unfortunately, these fees are extremely different from what you will run into a scam loan.
The following are a few warning signs to watch out for:
- Companies that ask for your bank account number, Social Security number, or credit card number without giving you any written documentation.
- Lenders that are located in the Caribbean and Canada. Take note that bad credit loan scams typically originate from the Caribbean and Canada. However, it does not mean that a loan is valid and true just because the bad credit lender is from somewhere else.
- Bad credit loans usually promise that you will get the loan before they have inquired about your credit. Lenders typically promise to offer you a loan regardless of your past bankruptcy, income, and credit history. No legit lender will provide you the money without some guarantee that you will repay it, which is a sure indication that you are dealing with a loan scam.
- You are told to send the upfront fee through another method, not via a personal check, credit card, or U.S. mail. Keep in mind that scammers normally don’t want to come by mailed payments since there are stringent mail fraud laws in the United States. Also, scammers do not want payments that can be traced easily. Bad credit loan scammers often ask their victims to send money via methods that are difficult to trace.
Avoiding Bad Credit Loan Scams
If you do not pay any upfront fees, then you are more or less safe from becoming a victim of a loan scam. Make sure to not fall for terms such as origination fee, insurance, processing fee, or any payment that is payable in advance of you getting the funds you have assumedly be eligible to borrow.
Also, you must avoid or keep away from any company that contacts you by telephone, offering to loan you money. Trustworthy and legitimate lenders will never do this scheme. You may get a preapproved or prequalified credit card offer via email. However, the lender will not ask you to pay an upfront fee if you choose to submit the application.
If you have any doubts or concerns at all, check with the state licensing board of the lender. Make sure to ask the lender which state he or she is located. Scam lenders will likely turn off any communications with you.
And it should be a huge sign itself. Once you know the location, check the identity of the company and find out if there’s anything you should be concerned about.
What if you have been swindled? What should you do? Well, you should talk to your local enforcement right away. Also, you need to contact your state Attorney General. Nevertheless, people with bad credit often feel that they have no valid options for borrowing. However, it is not the case. There are still options available for you. For one thing, you can rebuild your credit and work your way to getting better options.