How to Avoid Personal Loan Scams

Financial scams are only increasing in the United States. All manners of financial scams exist and one of the more insidious scams out there are those dealing with personal loans.

Personal loans are unsecured loans from a lender which can be used for various types of consumer expenses, but most known for debt consolidation. Because they don’t have any collateral, they can sometimes come with higher interest rates than a secured loan.

They’re often marketed to those who lack collateral, or who have less than perfect credit—and borrowers who can’t get traditional loans based on creditworthiness or collateral are often easily victimized by personal loan scams.

Types of Scams

There are several different types of personal loan scams, and it’s important to understand them so you can better recognize them to remain financially secure.

Upfront Fee/Loan Collateral Scam

If you’re trying to get a personal loan and you’ve been turned down by other banks, sometimes it’s tempting to see an offer from a lender that says they’ll lend you the money you need—if you pay a fee or “collateral” in the form of a wire transfer from your bank account or transaction from your debit card.

The scammer might tell you that they won’t use the money; they just want to make sure you have money set aside and can make payments on the loan.  In reality, they’re going to take that money from you and disappear, never to be heard from again.

No Credit Check Loan Scams

You’ll often see ads or signs for personal loans announcing that they don’t do credit checks. If you have less than perfect credit, this can sometimes sound like a chance at obtaining a loan. They may claim that there is a special, proprietary software or technology allowing them to estimate how much money you’re able to be approved for just by having you answer other questions or even filling out a survey.

Not only do you not actually get approved for a loan—usually after you’ve paid fees—but chances are you’ve given them some of your personal information, which they can use to scam you further or even steal your identity.

Email Scams

We’ve all seen the “Nigerian Prince” scam in which someone emails you to tell you they’re a prince or a dying old woman and they want to leave you all of their money, if you will only pay the wire transfer fees. The new email scams are a bit less preposterous, but just as dangerous.

Now, you may get emails that appear to be from a well-known lender, such as LendingTree, or even from a company like PayPal. They announce that you’ve qualified for a new loan product they’re about to start offering, specifically for people like you. All you need to do is click the link to apply.

There’s just one problem—they’re either about to steal all of your personal information, or they’re about to install malicious software on your computer. If you use your device to log into your bank, sometimes they can steal the password for your accounts.

How to Tell a Scam from a Legitimate Offer

While there are far too many different scams to cover completely here, there are a few ways you can tell the scammers from the legitimate offers.

  1. Look for grammar and spelling errors. These are clues that someone outside the U.S. is trying to scam you.
  2. Look up the bank’s information independently and see if there are complaints against them. Pay special attention to whether they’re even licensed to do business in your state.
  3. Contact them without using information from the letter or email and see if they have a record of sending you an offer.
  4. Find out if they have a physical address. Scammers usually don’t.
  5. Don’t ever follow up on emails or mailings you receive about personal loans unless they’re from a bank you recognize, and you can personally talk to one of their representatives.

You don’t have to be a victim. Learn the signs of a scam, and protect yourself.


Andy Kearns is a Content Analyst for LendEDU and works to produce personal finance content to help educate consumers across the globe.  When he’s not writing, you can find Andy cheering on the sub-par Lakers, or somewhere on a beach.

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