How to Know You’re Dealing With a Credible Lender

A personal loan can be an excellent option for those who need help paying off debt, or for those who could use extra money to cover life’s expenses. However, it’s an unfortunate fact that as the loan services industry has grown, fraudulent loan offers and predatory lending have become more common as well.

According to the Federal Trade Commission¹ (FTC), the department received more than 2.2 million fraud reports in 2020, amounting to a loss of over $3.3 billion.

Many of these scammers intentionally look for people trying to rebuild their credit or individuals they suspect are desperate for a loan, since they think they will be easier targets. In some cases, they even pretend to be calling on behalf of legitimate lending companies to deceive their victims. These scams by predatory lenders have disrupted people’s lives and damaged the credibility of lenders as a whole.

How to check if a lender is credible

Here are some questions you can ask to help ensure you’re dealing with a credible lending institution.

1. Does the offer seem unrealistic, outrageous or unbelievable? Is the lender making offers that seem too good to be true? Are they not interested in your income, payment history or other important factors lenders typically ask about? These are classic signs that you may be dealing with a bad actor.

2. Are upfront payments required? In some cases, a processing fee is normal, but it should always be presented along with loan closing materials. However, if a lender is asking you to submit payment before having your application reviewed, you may want to reconsider working with them.

3. Do they have a working phone number? What about physical, brick-and-mortar locations with real people working there? It’s generally not a good sign if the only place you can find or contact a lender is their website or a few social media profiles. It’s far easier to create a fake company with an online presence than it is to set up a phone line or establish physical locations where you can speak to actual employees.
   
   Keep in mind that digital loan closing – versus the need to physically sign paperwork to close a loan – is becoming increasingly common in today’s lending world. However, if you have any doubts, don’t hesitate to reach out to lenders to ask questions.
   
   Bottom line: A lack of any phone number or physical address listed on the website could be a red flag. If a lender has neither, you should proceed with caution and research the company further.

4. Did they contact you via SMS? SMS text message scams are a growing issue. The perpetrator’s goal is usually to get you to share your bank account information. They may claim that your account has been compromised (this is an attempt to steal your username and password). Another common claim is that they need your information in order to wire you money (they’re probably trying to clean out your account). While many legitimate lenders do contact customers via text, they do not text unsolicited loan offers to people they’ve had no prior contact with or ask for sensitive bank account information in a text message.

5. How long have they been in business? Do they share reviews from real customers? As a general rule, it’s safer to go with a lender that has a proven track record of honesty and success. Try to find out about the company’s history before taking out a loan.Likewise, look for customer feedback. A credible lender is not afraid to share testimonials. It should be easy to find these on their website, social media platforms and review websites such as Trust Pilot. If you see no customer reviews or they seem fabricated or inauthentic, it’s best to trust your instincts.

6. Do they use high-pressure sales tactics? If you feel like the lender is trying to twist your arm to take action— especially very early into your interactions with them — you should be on your guard. A lender that is willing to work with you to understand your needs and help make a decision that’s right for you will not try to pressure you to immediately take out a loan.

Keep your eye out for financial fraud

All people, regardless of age, gender, ethnicity or economic standing can be victims of financial fraud. Fraudsters have become sophisticated and crafty in their methods to obtain your information.

Today’s fraudsters are sophisticated and professional – and it’s understandable that they’re able to obtain bank account information and Social Security numbers over the phone or via email. Legitimate lenders don’t operate like this; they will usually send documents and other forms in the mail.

Here are a few things to look for:

• Legitimate debt collectors will send you proof, such as a bill or a letter of recommendation. They won’t call you and ask for information over the phone – predatory lenders might.
• Emails, known as “phishing,” are another method. Check the greeting for generic openers such as “Dear Friend.” Read the email thoroughly and look for grammatical errors, misspelling and sentences that are confusing or don’t make sense.
• Also, never click links in the email, or respond to the sender for complimentary offers or confirmation of an email you never sent. These actions could install viruses and other damaging software on your computer.

You have the right to ask

When you speak with a lender, don’t be afraid to ask questions. Remember, you’re the customer, and you have the right to request information. If they cannot or will not provide you with answers, it’s a sign that you may be dealing with a scammer. In the end, it all comes down to research. Be sure to thoroughly look into any lender you are considering.

https://www.consumer.ftc.gov/blog/2021/02/top-frauds-2020

This article has been updated from its original posting on March 5, 2019. Joe Guida contributed to this post.