If you’ve been turned down by traditional lenders and are in need of money, it can be tempting to hop online and search out other solutions. Before you sign up for any bad credit loans, pause for some due diligence. Online loan scams are common and can be devastating, making your current financial troubles even worse.
“When you are in financial trouble and are desperate for money, you may let your guard down when trying to get a loan. Unfortunately, there are fraudsters out there who prey on that particular vulnerability,” says Jeff Schwartz, executive director, Consolidated Credit Counseling Services of Canada.
“If you are in financial distress, you should seek other help that can help you deal head on with the problem instead, like credit counselling,” says Schwartz.
On the hunt for a bad credit loan? Here are some red flags to watch out for.
Be wary if someone offers you a guaranteed loan before you even start with the loan process. A loan application from a reputable lender involves you applying and the lender doing a credit history check. If you are promised anything prior to this process being completed, there is a good chance that you are dealing with a fraudster.
It is illegal for companies to charge you an upfront fee for a loan. In many cases, these shady loan companies ask for a fee in order to have the loan funds transferred to you. These upfront fees are called different things- “security”, “administration fee” or“processing fee” and they are asked for in order for the loan to proceed. If this is the case, walk away from the loan and report the “lender”.
With a legitimate lender, you may be charged a fee with your loan, but they are required by law to disclose this information ahead of time.
Money transfer services
If a lender asks you to send money via a money transfer service, that should be a warning. Also a red flag if you are asked to send money to another country or to a different address than what is listed for the company.
If you’ve got trouble determining what the loan company’s address is, or if you are pressured to act quickly, these are all problems. Don’t proceed.
Be careful with personal information
A fraudster doesn’t need a whole lot of personal information to steal your identity. Don’t divulge personal information online. These questionable lenders may pressure you for bank account or credit card info, date of birth, social insurance number, spouse’s name and more.
How you can protect yourself
Before you take on a bad credit loan, do a background check on the company through the Better Business Bureau. Check that the company has a licence to operate. Get contracts in writing. If inputting personal information online, check that the site is secure by looking for https:// at the beginning of the URL.
For bad credit loans, it’s definitely buyer beware, so make sure that you protect yourself.