ADVANCE FEE LOAN SCAMS

Loans that require an advance fee in order to achieve financing typically prey on the weakest members of society. These dishonest companies usually guarantee large unsecured personal loans to individuals that are not able to achieve approval for a loan via conventional lending institutions (banks, credit unions, etc.) or go after those with minimal financial knowledge. Equipped with a very aggressive but smooth pitch and an absolute lack of ethics, these scam artists typically swindle amounts that vary from a few hundred dollars to several thousand from unwary applicants. Making the matter even worse, these con-artists usually obtain enough personal info from their victims opening them up to identity theft. The advice below will help you avoid loan scams.

Signs of a loan scam:
1- Be aware of unsolicited emails, phone calls and/or letters offering you a guaranteed approval loan.
2- Requirements for advance sending of money to cover the cost/s of the application, processing, loan insurance or the first month's premium should be an instant red-flag of a loan scam.
3- Once these thieves have hooked you with you making an advance payment for your loan, they will often ask for even more money up-front indicating that the original quoted required advancement was incorrect, deficient upon a second examination of your credit, or that there is a second company involved that is also requiring advance fees in order to finalize your loan request.
4- Any sort of request for wiring of money via Western Union or a Moneygram to a non-US country lie Nigeria, Canada, England, etc.

Get more info on how to spot a loan scam.

How Do Advance Fee Loan Scammers Locate Potential Victims?
If you have applied for any sort of credit, it is very likely that your information was sold by the credit reporting agencies to multiple sources. This practice enables corrupt organizations to locate their victims. Be alert of unsolicited offers by phone, mail and/or email that guarantee loan approval. You should never disclose any personal information including but not limited to bank account info or your Social Security Number to anyone unless you are 100% certain that the company is legitimate and you have instigated the contact.

It is also very common for consumers to come across a classified ad or a website commonly placed on very reputable distribution channels, offering loans for people with bad credit and no credit. Some scammers will even use the logos of reputable lenders in their ads but insert their own contact info, tricking consumers into thinking that they are contacting legitimate lenders.

How Does the Personal Loan Scams Work?
There are several different variations of this type of advance fee loan scam. However, the fundamental steps are all the same. First, the applicant is guaranteed that they have been approved for an unsecured personal loan, typically for a very large amount. Authentic looking loan documents with all sorts fancy logos and embossed stamps will be sent to these consumers assuring them that the financier is a legitimate company. Below is an acceptance letter example we received from one of our visitors.

Dear #####,
I would like to apologize for the holdup in getting you your loan agreement documents. We have been having technical issues with our system. As per our phone conversation, you will find a copy of the loan commitment attached, reflecting the loan that we have been able to approve for you.

Please go over the forms, sign and fax back all four pages. Please do not forget to include your banking information so that we can directly deposit your funds into your account. In addition, please do not forget to fax your driver's license as proof of identification. Please feel free to contact me at any time with questions. Thank you for your business! We look forward to getting you the financing that you need!


The above letter may appear to be professional, coming from a legitimate company, but is merely intended to create a comfort zone for the consumer and eliminate any fears that they may be partaking in a scam.

After you fax the required documents, the next step of the scam is that you will be told that you need to make a deposit as a down payment for your loan because of your problematic credit rating. The deposit will be used as an insurance premium, or processing fee and will range from a few hundred dollars to several thousand. This deposit is usually required to be sent via Western Union or a Moneygram.

It is also common for the advance fee loan scammers to ask for an additional deposit after you send the first one because your poor credit rating requires an even larger deposit than initially quoted. Another angle of the scam is that they will contact the consumer posing as a different lender, indicating that the first lender has backed out, and that they will need an additional advanced fee in order to process the loan.

Typically, once the consumer comes to their senses and realizes that they have been victimized and that no funds are coming, the scammers have disappeared. The provided phone numbers are either disconnected or go straight to an answering machine. The operation likely also already relocated to a new location and are on the way to finding their next group of victims.

What Should You Do if You Become a Victim of an Advance Fee Loan Scam?
Even though you may be very ashamed and embarrassed it is very important that you report this crime timely. Not reporting the crime will continue to enable these predators to continue ripping people off.

If you have been a victim of an advance fee loan scam it is very important that you report it to the agencies below. Please note that the provided company address and name on your documents are not real. In order to keep their business secrete, the fraudsters use phony addresses, sometime those of REAL companies, or some random address belonging to a residence very far away from their actual operation:

1- Contact all three credit bureaus, Experian, Equifax and Transunion, and file fraud alerts with each. Doing so will help prevent yourself from becoming a victim of identity theft since the scammers will likely be in possession of sensitive information like your driver's license and/or your Social Security Number. Get more info on detecting identity theft.
2- FBI
3- FTC
4- Your local police
5- PhoneBusters - allows you to report the toll-free numbers being used if the call originated in Canada

It is also important that you get a free copy of your credit scores to make sure that you are not a victim of identity theft. If you do see signs of being an ID theft victim, you will need to take the proper steps to correct your credit report.

Related Reading:
Law Enforcement Listing by Agency and State
Better Business Bureau
Fraud.org


 


 

 


 

 

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