How to Avoid Online Loan Scams

Written By Mary Beth Eastman
Last updated December 11, 2020

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July 31, 2019

Simple. Thrifty. Living.

When you need to take out a loan, the last thing you want is to fall victim to an online loan scam that leaves you seriously out of pocket and with nowhere left to turn for compensation.

Unfortunately for consumers, financial scammers are more prevalent now than ever before and will often set their sights on individuals who have previously been denied a loan because they have a low or no credit score.

When you need access to money, but have a poor credit score, it’s tempting to accept any personal loan offer that comes your way. However, there are scammers out there waiting to take advantage of your situation and many of these loan scams can be found online.

You might be offered a personal loan through an email, Facebook ad or a website ad. Scammers look for a quick sale and use marketing language that preys on your emotions and your desire to find money quickly. They might tell you they can get you money fast, but what they don’t tell you is that there is an even bigger price to pay than you expected.

Here are some warning signs that you could be being targeted by an online loan scammer:

Upfront Fees

You should never be asked to pay upfront fees when taking out a loan product. However, some less scrupulous lenders will include application fees and document fees as part of their product. Does it really make sense that you are being asked to send money before you can be loaned money? Legitimate lenders will always disclose any fees and will roll these up into the total cost of your loan.

Phone Offer

Did you know that it is illegal for a lender to offer and agree to a loan over the phone? All offers must be put in writing.

Wire Transfers

Never wire money to a lender for any reason. Again, there should be no upfront fees involved in your loan product.

No Interest in Your Credit History

Your credit history is a clear indicator of your creditworthiness and how likely it is that you will repay your loan payments on time. If a lender shows no interest in your credit history this should be a big red flag.

Copycat Name

Scammers, in an attempt to appear legitimate, will often use a company name that is as close as possible to a legitimate loan company’s name. You should always check with the Better Business Bureau to authenticate the company’s address and phone number. Don’t use a loan company that is being run from a post office box.

Personal Information

Don’t give out personal details such as your social security number, banking details or date of birth unless you are very sure you are dealing with a legitimate lending company. This information could be used for identity theft or fraud.

State Registration

All lenders and loan brokers are required by law to register in the state in which they do business. You can check if a company is registered by checking with your Department of Banking, Attorney General’s office or the financial regulator for your state. While this might not guarantee a lender will offer perfect service, it could help you to identify a crook. Just because they say they are registered doesn’t make it so.


Checking reviews is one of the best ways to find a legitimate loan company and identify a scammer. If the company you are checking out has no reviews or very poor reviews, you know to steer well clear. That’s why we give in-depth reviews of the best online loan companies, so you won’t be victim to an online loan scam. Check out our Lendup Review: LendUp vs. Alternative Loan Options.

In a perfect world, there would be no need to fear scammers when looking for a loan product. However, armed with the right information, you should be able to identify the online loan scams and land yourself a great deal with a good quality lender.

About the Author

Mary Beth Eastman

Mary Beth Eastman serves as the content manager for Simple. Thrifty. Living, where she is dedicated to helping readers use money and credit wisely. Mary Beth believes that access to the right financial information paired with a growth mindset are essential tools for getting out of debt and building wealth. Mary Beth has a degree in Journalism from Bowling Green State University and has focused her 20-year journalism career on putting readers front and center, carefully considering their concerns and presenting information that will help them in their everyday lives. She has won numerous statewide journalism awards. Her writing on personal finance as been featured on numerous websites in addition to Simple. Thrifty. Living, including Huffington Post and Lexington Law blog. Mary Beth resides in Pittsburgh, Pa., with her family and two rescue dogs.

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