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Oct 05, 2019 08:55 PM EDT

5 Ways to Identify a Loan Scam

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In 2017, the Federal Trade Commission has issued a consumer's report that states that consumers lost an estimate of $905 million to financial scams on that year alone. This amount has increased over the years. Hence, it's safe to say that financial scammers have been running rampant, victimizing a lot of consumers through fake loan offers.

This, in general, is a pressing concern that has made a lot of people wary of loaning companies. Although this kind of response is understandable, the truth is that it's pretty easy to spot a lending scam if you know what just to look for. According to a professional, who holds an FHA DE underwriter certification from California, we have to be on the look out for some of the warning signs that a loan offer is bogus. 

Related Article: 7 Ways to Get the Best Personal Loan Rates 

State Registration

Any loaning company operating within your state is required to legally register under it. This means that a company registered in a different state is operating illegally in your state. Needless to say, this means that it's most probably a scam.

Credit History Review

It has been common knowledge that all lenders and loaning companies rely heavily on an individual's credit score and history before deciding to approve or deny a loan application. Therefore, it raises a red flag when an organization or a lender guarantees you an approved loan application without even checking your credit history.

Fees

A reputable loaning company is required to be transparent when it comes to fees, which is why all companies disclose this kind of information to the loan applicant beforehand. You should be wary of companies who are asking for payment before approving your loan. Logically speaking, it's ridiculous that you're being asked for a certain amount of money when you're the one who needs it.

Physical Address

Another telltale sign that a certain loaning company is bogus is if it has no apparent physical address. This means that all transactions are done online or through the phone. Naturally, this should raise some concern on your part. After all, it's like making a deal with a ghost. Without any establishment or a permanent address, chances are the loaning company in question is fake.

Loan Approval

Let's face it. Getting your loan application approved takes a lot of time and effort. This is why you should be cautious of lenders that guarantee the approval of your loan or that approves your loan in such a short time. Although this might sound enticing for some, the truth of the matter is that the entire offer is completely fake. Needless to say, you won't get anything good out of it.

Related Article: 4 Tips for Managing Student Loan Debt 

Truth be told, most scammers offer deals that are too good to be true. Although these kinds of offers and deals are very enticing, they should raise a red flag. Always be cautious when things seem to proceed a lot easier than it originally should. That's the best way to spot a scam. And when in doubt, check your local BBB website to confirm a lender's or a loaning company's legitimacy. 

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