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Identify and avoid loan scams and fraudsters

Innovations have digitized credit accessibility and with this seamlessness, several activities of Criminal Fraudulence has also been on the rise. Scammers now set up projects aimed at capturing, extortion and stealing from unsuspecting members of the general public. The Guardian reports that Nigerians lost over N300 billion to scam in the year 2021, this year, the figure has risen to a catastrophic amount.

But however widespread, these scams definitely are avoidable, so consumers must recognize the signs and how to identify them.

While it is most likely you’re facing a scam situation if you receive phone calls, unsolicited text messages via SMS, messaging apps or come across advertisements on social media or online offering loans or loan services.

In this article, we would be discussing some of the warning signs that show a loan may be fraudulent.

Contents

What are Loan Scams?

Loan scams are fraudulent acts carried out by cyber-criminals who pose as Creditors in a bid to either capture information belonging a prospective borrower, extort from them or to out rightly steal from them. They make use of several patterns and schemes, most of which we will be uncovering here.

What are the common types of loan scams?

Most types of loan scams seek to either extract money upfront or provide loan terms that are draconian and non-compliant that borrowers will be subject to late fees or other charges. Here are some of the popular types:

The two major types are either;

(a). Advance Fee Loan Scams. 

They will typically require these payments to be made with a gift card or prepaid card— either by asking you to mail them the card, or more commonly to read the information from the card to them over the phone. 

In this type of advance-fee loan scam, the victim is often contacted to be offered a low-interest loan in exchange for upfront fees. These fees are often termed “insurance” or to make a few payments up front to “demonstrate good faith”, “application fee,” origination fee,” or “processing fee.” Once payment is made, they become unreachable or unresponsive.

It is likely an Advance Fee Loan Scam if;
  • The supposed lender is asking for money upfront: Ads, email, or cold calls guaranteeing you a quick loan in exchange for a fee paid in advance, is most likely a scam. Do not reveal details of your credit card or bank account numbers. Legitimate lenders will charge you a fee for loans, nonetheless, the come after successful allocation of loan.
  • The offer is too good to be true: Fraudsters often claim they have special connections or can find loans other companies can’t. If the loan credit limit is higher or the interest rate is lower than anything else you’ve seen, be on high alert- especially if you have poor credit. If it sounds too good to be true it usually is.
  • There are no credit check: Most Legitimate lenders will not approve a personal loan without first reviewing the borrower’s credit report and credit score. Scammers often target individuals or businesses with bad credit or debt problems, and entice them with loan offers that legitimate financial institutions can’t provide. If they don’t ask for your credit report, they may not be a real institution.
  • Pressure to make a decision immediately: Scammers will often pressure you to make a decision immediately, even if you haven’t seen an official offer. Legitimate lenders will never push you to sign for a loan before you’ve had a chance to review the rates and terms

(b). Phishing scams.

Phishing is an email tactic fraudsters use to gain access to sensitive information, like your usernames, passwords, and financial data. Phishers use “social engineering”” a means of exploiting people through emotional manipulation- to convince and trick unsuspecting borrowers into providing personal information. In these scams, someone tries to get you to reveal sensitive information in order to provide you a loan. The loan never materializes but you or your business becomes a victim of identity theft.

In some cases, this can mean tricking you into opening an email attachment that installs malware on your computer. If you are not careful, you will take these e-mails to have been from legitimate sources.

In these scams, someone tries to get you to reveal sensitive information in order to provide you a loan. The loan never materializes but you or your business becomes a victim of identity theft.

It is likely an Phishing Scam if;
  • You receive unexpected email attachments: Never open an email attachment from an unknown sender, even if it looks like it’s legit or from a trusted contact. Phishers are getting better at impersonating entities like banks, credit card companies, and social networks, which means it’s easier than ever to fool even the savviest of targets. If you have security software installed on your computer, it should catch a lot of would-be malware, but don’t rely on it as your sole line of defense.
  • The mail contains poor grammar and structure: In an age of fast-paced communication, it’s not unusual to spot the occasional typo or misplaced comma in an email from a legitimate lender. However, most businesses have a process for reviewing email content before it’s sent out into the world, so multiple errors should be an immediate warning sign. Phishing emails often “sound” strange and contain misspellings, missing tenses, transposed words, and generalities.
  • You receive unusual mails from familiar email address: Phishing scammers know you’re more likely to open and trust the content within an email if it looks like it was sent by a company or person you know. They do this by subtly adjusting the domain name of the sender’s email address. The subtle addition of the hyphen, dot or one letter, could be the only clue that it’s a scam.
    One way to detect fake emails is to hover over the link to see the destination address. If it looks unfamiliar or shows a destination that’s different from the domain, report it or delete it.

(c). Government agency imposter scams

Perpetrators of this class of scam often call or email you claiming to represent a federal or state government agency. Victims are tricked into providing personal data or money immediately or be penalized. During the height of the pandemic, government scams expanded to include offers for vaccinations, fake COVID cures, and expedited stimulus checks. 

It is likely a government agency imposter scam if:
  • Means of contact: The IRS will never contact you by email, text, or social media with information about money matters. When you do receive emails from the government, they’ll always come from a “.gov” extension. If you have any doubts, use a web browser to search for the email address. Official government email addresses will likely show up in search results; scam emails will not.
  • Law enforcement impersonation: Similarly, members of law enforcement will never call you asking for sensitive data or payment to avoid getting arrested, fined, deported, or detained. Law enforcement scammers may even provide badge numbers or names of real law enforcement officials to seem legit and scare you into complying. Don’t give in to the pressure—just hang up.

(d). Fake cheque scams

In a fake check scam, a person or business contacts you and asks you to deposit a check, cashier’s check, or money order into your account and then wire the money back to them for payment. If you agree, the check they sent you will eventually bounce, and by the time you realize it, the fraudster will be long gone with the money you sent them. 

It is likely fake cheque scam if:

  • Job offers: The scammer will claim to offer you a job and send you a counterfeit check to deposit. Under the guise of the job’s responsibilities, they’ll give you instructions to return or send some of the money in a particular form, such as a wire transfer or gift card. When the check inevitably bounces, you’ll be out the money that you sent, plus any bank fees resulting from the bad check.
  • Lotteries or sweepstakes: The scammer will send you a fake cashier’s check for an alleged foreign lottery win, then ask you to immediately wire them money to cover taxes or fees.
  • Overpayment: The scammer will pretend to want to buy something that you’re selling online. They will then “accidentally ” send you a check for more than the cost of the item, and ask you to return the difference. Ultimately, you can wind up losing the money and the item you’re selling.

(e). Debt settlement scams

Debt settlement (or debt relief) companies promise they can get your debts canceled or reduced to “pennies on the dollar.” Their business is to negotiate with your creditors and get them to change their contracts with you.

Though some debt settlement companies are legitimate, fraudulent ones will quickly take your money and then fail to fulfill their promise. We recommend better alternatives, like debt management plans or, if you have good credit, consolidating debt with a lower-interest personal loan. 

It is likely a debt settlement loan scam if:

  • You are been asked to pay money upfront: Just as with advance-fee scams, non-reputable debt settlement companies will often ask you to pay a “registration” or “processing” fee in advance. Not only is this unethical, it’s illegal. Ignore any debt settlement company asking to be paid upfront.
  • Guaranteeing debt forgiveness: Getting creditors to reduce or forgive your debt is a negotiation, not a promise. No business can guarantee that all your debt will be settled.
  • Advising you to stop making payments: Never trust a company that advises you to stop paying or communicating with your creditors. This will get you nowhere with your debts and only serve to further damage your credit.

(f). Donation or Charity Scams

Donation or charity scams are very similar in pattern to phishing and advance-fee loan scams in that scammers will often pretend to be legitimate organizations.

Through crowdsourcing and crowd-funding, it becomes even more daunting to differentiate the legitimate from illegitimate.

(g). Debt consolidation scam

Truly, debt consolidation can help you streamline the process of repaying your debt and can save you money in the long run.

However, if a debt consolidation company is pressures you to cut-off contact with your creditors, the odds are, you are a likely victim of a debt consolidation scam.

Quickly ways or red flags to spot a loan scam.

  • It sounds too good to be true.
  • The Lender guarantees approval.
  • The lender calls, writes or knocks.
  • The lender demands a prepaid card or other payment upfront.
  • The lender doesn’t have a valid physical address.
  • The lender doesn’t provide anything in writing.
  • The lender has a suspicious website (or none at all).
  • The lender has no valid physical address.
  • The lender is not transparent about its fees.
  • The lender isn’t registered in your state.
  • The lender pressures you to act immediately.
  • You are required to reveal sensitive information.
  • The lender doesn’t care about your credit history.
  • The lender isn’t registered in your state.
  • The loan details are unclear.

What to do if you have been a victim of Loan Scam?

There are a couple of steps you can take if you have been scammed;

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