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What are the most common funding scams?


1. The lender guaranteed approval

Rest easy! A reputable lender will always take the time to look at your credit report and make sure you have a good history of making payments on time. With most loans, they will get a report from all three major credit bureaus, Equifax, TransUnion, and Experian, so they can trust you will make your payments in a timely manner.

2. The lender isn’t registered in your state

If you're wondering about the legality of any lender you're considering, the Federal Trade Commission has a great resource: Check the lender's website to see which states they're registered in. If they don't have a list of registered states, it's best to look elsewhere to avoid any potential loan scams.

It's essential to make sure you're dealing with a legitimate business, so don't forget to check their registration! To keep your banking and personal information secure, make sure the company is registered in your state - if they don't operate there, they're not allowed to give you a loan.

3. The lender demands payment upfront

Beware of scammers who may ask for prepaid debit cards, gift cards or banking information, falsely claiming that they need it for insurance, collateral or fees. However, you should know that this is a scam. Legitimate financial institutions may charge a fee for your application, appraisal or credit report, but they will be deducted from your loan.

When you borrow money from a reliable lender, you don't need to pay anything before actually receiving your loan. When the loan is finalized, the money can be sent to you via a wire transfer, direct deposit, or a check - which you can then deposit into your checking account.

4. The lender calls, writes, or knocks

Be aware of any loan offers that come your way, either over the phone, through the mail, or even through door-to-door solicitation. The Federal Trade Commission (FTC) has made it illegal for companies to offer loans in the U.S. over the phone and ask for payment upfront. This falls under the Telemarketing Sales Rule. It is, however, legal for lenders to send out basic advertisements to consumers through email.

It's important to be cautious of scammers who may try to steal from you, even if they use the name or logo of a legitimate lender. They may also change the caller ID number to make it look like they are the real lender. The FTC warns consumers to be aware of this.

Remember to never engage with solicitations and instead, contact the lender directly through their secure website or customer service hotline. If there’s no trace of them reaching out to you, you can rest assured the call or mail was from a scam artist. To be on the safe side, always go for lenders advertised through online and mass media outlets.

5. The lender has no physical address

If you're looking into lenders, it's important to make sure they have a physical location. You can easily check this on Google Maps. It's also wise to double-check that the address is legitimate and not just a vacant lot. If you can't find any sign of a physical address, it's best to steer clear of the lender. Fraudulent businesses typically won't have a traceable address so that they can avoid legal repercussions. To stay safe, only work with companies that can provide a real physical address. Always verify the address before you commit to anything.

6. The lender pressures you to act immediately

We get it - it can be tempting to take on a loan when it's offered with a strict deadline. But don't let this urgency push you into making a decision you're not comfortable with. This could be a sign of a scam, and it's important to have time to do your research. Don't feel like you have to rush your choice - take a few days or weeks to decide if it's the right fit for you.

7. The lender is not transparent about its fees

When it comes to loan providers, it is important to be aware of any fees that may be charged. Some lenders may not list their fees on their website, however, they should be disclosed during the application process and before you sign anything. It is important to be aware of and understand the fees before you complete your loan application. If you are asked to pay any fees upfront, such as processing, insurance, and paperwork before your loan has been approved, it is likely a scam and it is best to walk away. Legitimate lenders will make you aware of any fees that may be charged before you submit an application.

8. It sounds too good to be true

Even if a personal loan offer looks too good to be true, it's likely not a real offer. Legitimate lenders won't just call you out of the blue with an offer that's too good to be true - usually, a loan offer with an unbelievably low rate requires an application and a hard credit pull. Plus, a letter from a bank guaranteeing instant approval without having to apply is unlikely to be real. If you're offered lightning-fast loan proceeds, it's probably a scam. So, bottom line - don't trust an offer that looks too good to be true, because it probably is!

Common types of loan scams

If you're looking for a loan, there are some types of scams to watch out for. - 

Loan fee scams, for instance, may try to entice you with the promise of a low-cost loan in exchange for fees upfront. But after you pay the fees, they'll disappear without providing you with any loan money. 

There are also no-credit-check scams, which you should always be wary of since your credit score is a major factor in evaluating how risky you are to lend to. 

Lastly, be careful of debt consolidation scams, as it can be hard to tell if a company offering it is legitimate or not.