When trying to borrow money online, it’s possible you could come across scammers who are trying to take advantage of your financial situation. Whether you’re applying for student loans, secured loans, or any other kind of loan online, being aware of the possible types of scams and what to look for can help you financially protect yourself.
Types of scams
When searching for a loan online, here are some of the most common scams you might see:
Imposter scams
An imposter scam occurs when a scammer pretends to be someone they’re not to trick you into giving them your money or your personal information. In this case, they might pretend to be your bank or a credit provider you trust, and they can be extremely convincing. They might fake the caller ID, send official-looking letters, or even set up a fake website using logos from the real company.
Advance-fee scams
Another common scam is an advance-fee loan scam. Here, the criminal pretends to be a trustworthy lender to target people who are looking for access to credit. In this case, they pretend to be a company on the market offering money-lending services. They’ll tell you to pay a fee (for processing reasons or as an application fee) before your loan can be issued, but they’ll promise a quick approval once you pay. Unfortunately, this is a lie, and once they have your money, they’ll disappear.
Guaranteed approval scams
A guaranteed approval scam is when a scammer promises the loan will be approved without any checks. Reputable lenders won’t guarantee a loan can be approved, as they need to evaluate your ability to pay it back by looking at your credit history and income levels. In these scams, the criminal’s objective is often to steal your personal information, such as your Social Security number. They can then sell this information online to other scammers, or use it themselves to open accounts or take out secured debt in your name.
Warning signs of a scam
Now that you know the types of scams, how can you be on the lookout for them when trying to borrow money online? You’ll probably notice one or more of these warning signs if someone is trying to scam you:
- The lender contacts you first – Real lenders usually only reach out once you’ve applied for a loan.
- They promise your loan will be approved – Honest lenders always check your credit history first before making any guarantees.
- The website or email address looks strange – There might be a small spelling mistake, like gooogle.com instead of google.com.
- The website looks unprofessional – It has typos, blurry images, or poor design.
- They don’t have a physical address – Even online lenders must have a location where their business is registered.
- They demand upfront payment – Real lenders won’t ask you for money.
- They request payment in an unusual way – For example, they may request a prepaid debit card or cryptocurrency.
- They pressure you to act fast – They might tell you that you’ll lose this lending opportunity if you don’t decide right now.
- They ask for more personal information than you expect – For example, they ask for your credit card number, your PIN, or your mother’s maiden name.
How to protect yourself
By educating yourself on the types of scams and their warning signs, you’ve already put yourself in a better position to avoid scams when borrowing money online. But staying alert helps you protect yourself further, because scammers are always finding new ways to trick people, especially with the help of AI.
Monitor your finances
Review your checking account regularly. If you notice any unfamiliar charges, talk to your bank immediately so you can dispute the charge. Check your credit report, and if you notice any unexpected drops, consider freezing your credit until you can investigate why it happened.
Research the provider
If something sounds too good to be true, it often is. One way to research if a provider is real is by typing the company’s name into Google with words like “scam” or “complaint”. You might come across posts from other people who were scammed and lost money. Take your time, slow down, and ask questions to get more information.
Check official sources
You can double-check that someone is who they say they are by checking official sources. For example, if you receive an email from an unknown person claiming to be your loan provider, you can call your provider at the number listed on their official website and ask them if the request is real.
The bottom line
Borrowing money online can be safe and easy by simply taking a few moments to check things out. Trust your gut if something doesn’t feel right, and you may be in a great position to borrow money without issues.
