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How to avoid loan scams
If you are thinking of taking out a loan – perhaps to pay for home improvements or to buy a new car – you want to be sure that you’re borrowing from a reputable company and that you’ll actually get the money you’ve applied for if you are accepted. Unfortunately there are some criminals out there who try to scam those looking for credit – especially those who might already have been rejected for credit elsewhere. But don’t worry – we’ll take you through how you can avoid loan scams and what to do if you want to borrow money securely.
Pay to borrow
According to Action Fraud, one of the most common types of loan scam is when people are asked to pay an upfront fee to borrow money. This can happen when you see a loan that’s advertised as carrying out no credit check or that claims you’ll be accepted ‘no questions asked’. You’ll be told that to release the loan, you’ll have to pay an advance fee. You might then be contacted for even more money, with various reasons given for the payments.
Of course, this is a scam – there is no loan and you’ll never get the money you’ve been promised. Although some completely legitimate brokers may charge fees for a loan, individual lenders will never ask you for money upfront, so you’re right to be wary of any that do this.
To avoid being scammed by a fake lender, here’s what to look out for:
- If lenders say they don’t carry out any credit checks or that you’ll be guaranteed a loan, warning bells should sound.
- When they send you letters or emails, they’re full of spelling and grammar mistakes – this could mean that they’re not a real company.
- Lenders that charge upfront fees and give sketchy reasons for this should be avoided, as they could be scamming you.
- If you’re already repaying a loan, be wary if you’re contacted by a company with a similar name to your lender – they could be trying to trick you into making payments to them instead.
- If they aren’t in the UK – most reputable firms lending in the UK are based in the UK.
- If they use a non-corporate email address. For example if they are from “loanco” with a website loanco.co.uk then you would expect their email address to be email@example.com. If they use a generic email – such as Google, Yahoo or Hotmail this is a warning sign.
- If they only give you a mobile number. Reputable firms have landline numbers and will be happy to give them to you.
- Beware of other tactics that criminals may use to convince you they are “genuine” such as emailing you a picture of their “company ID”. Staff at genuine firms would never do this.
It’s easy to find out if a company that you’re considering taking out a loan from is legitimate. All businesses authorised to offer consumer credit in the UK must be approved or have interim permission from the Financial Conduct Authority (FCA). You can search the FCA’s Financial Services Register for the lender’s name or FCA registration number.
As we’ve mentioned, some unscrupulous companies can mimic real lenders to try and get your money, often using their real name and address. To be sure that you’re dealing with a real lender, call them using the number displayed on the real lender’s website – they’ll be able to tell you if they know about your loan offer or if it’s someone trying to trick you. The FCA also has a useful list of unauthorised lenders to avoid – here.