Personal loans are an incredibly helpful financial tool when used appropriately. It can help you consolidate debt, especially if you have high-interest credit card debt. It can also help you find cash for any financial emergency. Unfortunately, there are a lot of people who like to prey on consumers who are looking for access to funds through credit. Personal loan scams are a dime a dozen, nowadays. In fact, according to the Federal Trade Commission, nearly $1 trillion was lost due to loan scams and fraud in 2017. To avoid becoming a victim of online personal loan scams, we've compiled a list of warning signs you should watch out for.


What are personal loan scams?

A personal loan scam takes advantage of people who are in need of money by tricking them into giving the "lender" whatever money they do have. So, how does this happen? Well, once the fake lender approves the loan, he or she promises to send the money once the borrower pays a fee. They may call it an origination fee, a loan insurance fee, or small collateral for the loan. The amount could be as low as $50 or go as high as several thousand dollars. The amount will usually depend on the amount of money being borrowed. Of course, once the borrower pays the fee, the lender disappears, never to be heard from again.

Take note that not all fraudsters are out to get your money. Some use these scams in order to get something far more valuable – your personal information for identity theft.


Reputable lenders will always look into your credit history or other financial information in order to determine whether you will be able to pay back the loan. If a lender tells you that they don't need to check your credit in order to approve your loan, you should be very wary. Scammers are not interested in learning whether you can pay off your loan because they're more interested in getting your money or personal information. To protect yourself, read up on all the requirements of a loan application. If it looks too good to be true, it probably is. For those with poor credit, don’t be disheartened. There are reputable lenders who will issue you an approval for a bad credit loan. While the rates and fees may not be as low as you’d like them to be, they’re better than getting scammed.


One of the most common warning signs that a lender is not legit is the requirement of a fee in exchange for guaranteed approval. Once you pay the fee, the scammer disappears, and you're left wondering where the loan money is. As we've already mentioned, a lender promising to loan money in exchange for a fee is not a legitimate one as the act is considered illegal.

Aside from asking for an upfront fee, another red flag is the payment method the lender uses. The US has very strict mail fraud laws. As a result, scammers don’t like receiving payments through the mail. They also avoid having the payment made via credit card or personal check. If the “lender” asks for payment to be wired to them, then you should also be wary.


How to find personal loans that are not scams:

Spotting a personal loan scam is easy once you know what to look out for. Most of the time, if something is too good to be true or feels off, then just steer clear. There are plenty of reputable personal loan lenders for you to choose from. To figure out which lenders are real and which ones are fake, make sure:

  1. the lender is easy to contact
  2. the lender has a secure website
  3. the lender runs a credit check
  4. the loan terms are clearly written
  5. there are no upfront fees
  6. reviews and ratings are available online

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