Borrowers are often targeted by “companies” who offer bad credit loans. Most of the time, these loans are scams intended to trick you into giving up some funds. People with bad credit are often victims of these bad credit loan scams as they suffer a lot of rejection from credible lenders due to their bad credit state. So, they become easy targets and fall for the scam.In bad credit loan scams, the lenders often promise to send you a loan, but only after you first send a fee to obtain the loan. The fee may be as low as $50 or up to several thousand dollars depending on the amount you’re borrowing. This fee is often termed “a loan origination fee”, “loan insurance fee”, or even “collateral” for the loan. You send the money and wait for your loan, but you never receive it. There are ways you can identify a bad credit loan scam.
Signs Of A Bad Credit Loan Scam
The most obvious sign of a bad credit loan scam is a request for upfront payment. Though it’s important to point out that, with a mortgage or car loan there will be a down payment on a mortgage or car loan or closing costs. This cost goes to the seller and reduces the amount you have to borrow.
The difference is that bad credit loan scams typically guarantee you’ll receive a loan, even before they’ve checked your credit. They promise to give you a loan regardless of your credit history, income, or a past bankruptcy. No legitimate lender will give you a loan without some assurance that you’re going to pay the loan back.
Another sign of a loan scam is being asked to send upfront payment via a method other than U.S. mail, credit card, or a personal check. Because there are strict mail fraud laws in the United States, scammers don’t usually receive payments through the mail. Instead, they often request that you wire the payment to them. Scammers are increasingly asking victims to send money via Green Money MoneyPak, cryptocurrency, and Venmo which are all methods that are hard to trace or refund once the funds have been sent.
Be wary of lenders in foreign countries like Canada or the Caribbean. These are the two most common places that bad credit loan scams seem to originate. Just because the loan comes from somewhere other than those two places doesn’t mean it’s legitimate. Carefully compare the loan to the other criteria to verify the bad credit loan.
Beware of companies requesting your social security number, bank account number, or credit card number without providing you any written documentation on the loan. Avoid giving out sensitive information over the phone unless you initiated the call to a business you know and trust.
What To Do If You’ve Been Scammed
If you’ve been the victim of a bad credit loan scam, contact your local law enforcement as soon as possible. You should also notify your state Attorney General, the FBI if the company was from another state or country, and the Federal Trade Commission. It’s also a good idea to let the Better Business Bureau know about the scam to alert other consumers about such fraudsters.