Spot loans are not safer than bank loans, according to the Federal Trade Commission. This is because of the greater threat of alleged spot lenders scamming their customers.
Banks and other trustworthy lenders evaluate the credit of those they lend money to. Many spot loan companies advertise that bed credit is not a problem or that their loans are guaranteed, and the Federal Trade Commission, or FTC, claims this may be a warning sign of a scam. One way such lenders take advantage of customers is to demand an upfront fee before processing the loan. They may claim such a fee is for insurance or processing, but the FTC notes this may be a way of surprising the customer with unadvertised additional fees or for obtaining personal information about the customer that the scam artist can later use to withdraw money from the individual's bank account.
To verify that a spot lender is not a scam artist, the FTC recommends obtaining the company's phone number from a phone book or other form of directory assistance and to contact the company to ensure it has a physical address. If a company is only using a PO box, the potential customer should ask local authorities about its legitimacy. Customers should also avoid any lender that asks customers to make payments to an individual instead of the company, as advised by the FTC.