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Online Loan Scam Tips

Know the signs. 7 red flags to detect an online loan scam.

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Online Loan Scams

Sometimes you need more money than what you have in your accounts. A personal loan may be a logical option, but before you hit submit on any online loan application, do your research. There are 7 RED FLAGS that the online lender may be a scammer:

#1 The lender isn’t interested in your payment history

One of the upfront disclosures you should see is the requirement to pull your credit report before lending you money. Reputable lenders make it clear that they’ll need to look at your credit, sometimes getting reports from all three major credit bureaus (Equifax, TransUnion and Experian). They need to know whether you have a history of paying bills on time and in full, which offers them some assurance that you’ll be just as diligent about repaying a loan. On the other hand, the operators of loan scams aren’t really interested in timely repayment. They tend to do the opposite, seeking high-risk borrowers who are likely to fall behind on loan payments and, as a result, incur their excessively high late fees and penalties.


#2 The lender isn’t registered in your state

The Federal Trade Commission (FTC) requires that lenders and loan brokers must register in the states where they conduct business. If a lender you’re interested in does not list any states, you could be dealing with a loan scam. Check the lender’s website to verify a list of states where it legally conducts business. If you don’t find it, contact your state attorney general’s office for further verification. Lenders also must operate under a bank charter, so look for that information on the lender’s website as well.


#3 The lender demands a prepaid debit card

Some scammers will require you to provide a prepaid debit card, claiming they need it for insurance, collateral or fees. Legitimate financial institutions may charge a fee for your application, appraisal or credit report, but those charges are deducted from your loan.

A prepaid debit card can be a useful tool for personal loan scams. It’s virtually as untraceable as cash, and good luck reporting it as stolen if you’ve voluntarily given it to a scammer.


#4 The lender calls, writes or knocks

Legitimate lenders typically advertise in ways you would expect, such as online or through other mass media. If you get a loan offer by phone, through the mail or even a door-to-door solicitation, be on your guard immediately. According to the FTC, it’s illegal for companies to offer a loan in the U.S. over the phone.


#5 The lender’s website isn’t secure

When visiting a lender’s site, what you don’t see can be just as important as what you do see. Always look for: A padlock symbol on any pages where you’re asked to provide personal information An “s” after “http” on the site address — “s” as in secure” — so it shows as https://www… The padlock symbol and the secure address mean the site is protected from identity thieves who steal personal information and sell it to other criminals. At best, the lack of these safety measures means the lender isn’t concerned about the integrity of the site. At worst, it could mean the lender is leaving your information exposed on purpose as part of a loan scam.


#6 The lender has no physical address

Make sure the lender you’re interested in has provided a physical location. (Even then, you will still want to plug that address into Google Maps. In some cases, businesses running personal loan scams will list addresses that are actually vacant lots.) If you don’t find any sign of an actual physical address, you should avoid the lender. Many operators of loan scams would rather be untraceable so they can avoid legal consequences.


#7 The lender pressures you to act immediately

Don’t fall for the urgency plea. One of the hallmarks of personal loan scams is giving you an immediate deadline to take out the loan because the offer expires quickly — possibly even the next day. A lender that uses this kind of high-pressure tactic could be up to no good. It may be a ploy to get you to make a rash decision.


At MTC Federal your personal financial information is like money. We care and want to make sure you are treated with respect and dignity. Our loan consultants and member service representatives are available Monday – Friday, 8 am – 5 pm EST by phone 800-442-7792 or email to answer your questions. Our financial experts will perform a credit analysis to fit your financial situation with your budget and your needs. As a not-for-profit financial institution backed by the NCUA, we do not exceed 18% annual interest on personal loans.

If you feel that you have fallen victim to an online loan scam, contact 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. Be sure to document all correspondence with the scammer.