With technology becoming increasingly more advanced, it’s becoming easier and easier to fall victim to personal loan scams. When you’re in financial stress and desperately need a loan, it can become even harder to see the signs of a loan scam.

By being aware of some common tell-tale signs of a possible personal loan scam you can protect yourself from potential losses. Let’s have a look at some of the most common signs of a loan scam.

1. They’re not a registered financial services provider

Before you sign a contract or even inquire about a loan, you should always check that the lender you’re contacting is legitimate. To conduct business as a financial services provider in Australia, companies need to register for an Australian Financial Services (AFS) licence. If they don’t have a licence, don’t deal with them. Also, even if they do provide you with an AFS licence number, you should check the Australian Securities and Investment Commission (ASIC) Professional Register list to be sure that the number is legitimate. You can also check the list of known fake regulators to make sure they don’t appear there.

2. They contact you first

It may seem like serendipity, but if someone contacts you first, there’s a good chance they aren’t legit. Whether they contact you over the phone, through the post or by email, always consider that it may be a scam. Trustworthy companies don’t cold-call potential borrowers. If you already have a service with a bank, for example, they may contact you about their other services but if it’s someone who you haven’t dealt with before, be very wary and conduct proper checks.

3. The rate or terms seems ‘too good to be true’

As the saying goes “If it seems too good to be true, it probably is”. Lending is a competitive market and businesses are constantly competing with each other and adjusting their rates, but if the rate is very low compared to everyone else, there’s a good chance it’s a loan scam.

4. The website isn’t secure

When dealing with financial transactions, you want your lender to be concerned about internet security. Look for the padlock symbol located next to the website address bar to confirm that the site is using a secure SSL connection. This may sound complicated, but essentially if they aren’t a secured website then your confidential information is at risk. If a lender doesn’t have a secure website, then they aren’t concerned about your security and that is a big red flag that they may be a personal loan scammer.

5. You can’t find any address or contact details

If you can’t find any way to get in touch with the lender, don’t continue with your enquiry. You need to be able to see contact information, and even better, a physical address. A legitimate lender should provide licence, address and contact details and if contacted, should provide decent customer support.

If a lender was to scam you, it would be difficult to get in touch with them if they don’t freely provide that information. Therefore, most scammers are likely to hide their contact information so that they can’t easily be found.

6. The loan is guaranteed

While it sounds nice, no loan is 100% guaranteed. If a lender guarantees that you’ll be approved without even knowing your personal circumstances or credit score, then they may be fraudulent. They offer these guarantees to lure you in and take upfront deposits or fees before disappearing.

7. The loan offer is vague or incomplete

If a lender is hiding some of the information you usually expect in a loan such as full terms and conditions, early exit fees, balloon payment fees or interest rates, then do your checks before you consider their offer. If the offer lacks this detail or there are consistent spelling and grammar mistakes, or something doesn’t seem right then it could be a scam.

8. They don’t run a credit check

Credit licensees must comply with the responsible lending conduct obligations under the National Consumer Credit Protection Act 2009 (NCCP). This means that licensees must not enter into a contract with a customer if the suggested contract could be deemed ‘unsuitable’ for that customer. This means that the licensee must run appropriate checks to ensure you have the ability to service the loan. If a lender doesn’t run a check on your credit or doesn’t ask information about your financial situation, then they are not complying with the NCCP and could very likely be a loan scammer.

9. They ask for money up front

Believe it or not, some payday loan scams will ask you for a percentage up front in order to secure your cash. People actually pay the service to give them money. Don’t be one of those people. A legitimate lender will not ask you for any money up front.

10. They have a bad BBB score

The Better Business Bureau is a tried and true test to check for payday loan scams. If someone has been scammed before, the company’s reviews will light up with complaints from those scorned. Take a quick search through their reviews page to see if any complaints have been filed. The BBB gives you a rundown of their rating system so you know what to look out for. The website will also provide you with reviews from previous users who have been scammed.

I think I’ve been scammed. What should I do now?

If you think you’ve been scammed, contact your bank immediately. They may be able to stop any fraudulent transactions from going through your account. If you sent money through another company or service, contact them as well.

You should also report the incident to the Australian Securities and Investments Commission (ASIC) as well as your local police station.

Unfortunately, there may not be much that can be done about getting your money back from any initial fees you paid but you can stop yourself from getting into further trouble by contacting someone if you suspect something isn’t right.

Some other things that you can do include:

• Keep any email contact from the scammer as proof.
• Check your bank accounts regularly for suspicious transactions.
• Request a freeze on your account.
• Request new cards from your bank.
• Scan your computer for viruses.
• Get a copy of your credit report to see who may have recently checked your credit history.
• Warn family and friends.

Disclaimer: Please be aware that Cigno Loans’ articles do not replace advice from an accountant or financial advisor. All information provided is intended to be used as a guide only, as it does not take into account your personal financial situation or needs. If you require assistance, it is recommended that you consult a licensed financial or tax advisor.