There are plenty of red flags that warn consumers if a loan is a scam. These warning signs include a lender not caring about a credit history and a loan that is offered by phone, according to the Federal Trade Commission (FTC).
Many people try to obtain a loan for things such as home repair, paying bills or emergency expenses. The following telltale signs will let a borrower know if a loan company is legitimate, or if the loan is a scam:
- Credit history does not matter
- Undisclosed fees
- Upfront fees
A company that is willing to give a borrower money without checking credit history is usually bad news for the borrower. Catchphrases that indicate a scam include "guaranteed approval" and "bad credit is no problem."
Any company that is not completely upfront and honest about application fees or interest rates is not a legitimate company. Borrowers have the right to understand any fees that come along with the loan they are applying for, before accepting the money.
Consumers who encounter a company that asks for money upfront should reconsider. Although legitimate companies usually require the borrower to pay for the application or processing fees, these should not need to be paid before the loan is obtained. The FTC warns consumers to never send money to a loan company.