Seven Ways to Spot a Loan Scam

Your credit’s trending in the wrong direction, you’re short on cash, and you’re desperate for a loan. You need to get your hands on some cash to help pull you out of this tight spot, and fast! Unfortunately, though, it feels like no reputable institution is willing to grant you a loan. And the few that will do so only with very unforgiving terms.

Then, miraculously, you find it: an ad for an easy loan with great terms that will qualify almost anyone. Best of all, the company is willing to work with borrowers regardless of their financial state. Finally – a way out! It’s the answer you’ve been waiting for. A dream come true.

Or is it?

Burlap sack with a dollar sign printed on it

Most successful scams prey on desperate and vulnerable victims. Loan scams are no exception: They specifically target people in dire straits and may be willing to do anything to get their hands on some cash. But sadly, falling prey to a loan scam will only pull the borrower deeper into the pit of debt.

Once loan scammers have snagged a victim, the scammers will begin having the borrower fill out a loan “application.” The victim, eager to get that quick money, willingly shares anything asked of them, including sensitive and personal information. With that info in hand, the scammer can make off with these details and empty the victim’s accounts, charge a shopping spree on the victim’s cards, or even steal the victim’s identity.

Sometimes, the scammer may ask for an upfront debit card payment as collateral or insurance for the loan. The victim will never see that money again.


Awareness and caution are the best defense. Here are seven proven ways to spot a loan scam:

1. There’s no credit check 

Every reputable lender, whether they’re affiliated with a credit union, a car dealership, or an online institution, will want to verify that the borrower can and will repay the loan before they agree to the transaction. If a lender doesn’t bother checking your credit score and history, you can be sure they have no intention of lending you a dime.

The single exception to this rule is payday loans. Since these have such short terms and extraordinarily high-interest rates, lenders don’t bother with credit checks. They still make money even if borrowers occasionally default on their loans.

2. You’re asked to pay an upfront fee 

You shouldn’t have to pay for a loan. When a lender asks you to pay a loan collateral, insurance, or fees by prepaid debit card or wire transfer, you’re being scammed! Back out of the deal before it’s too late.

3. The lender isn’t registered in your state 

Per the Federal Trade Commission (FTC), every lender and loan broker must be officially registered in the states where they conduct business. A legitimate lender will have a list of states posted on their site to let borrowers know where they’re registered. If you can’t find this information on the site and the lender refuses to provide further details, they are likely not legitimate.

4. The lender is not affiliated with any financial institution 

Authentic lenders must operate under a bank or credit union charter. This information should be posted on the lender’s site. If it’s missing, you might be dealing with a scammer.

5. You’re (sometimes strongly) urged to act immediately  

If a lender stresses that you must submit your information and make your upfront payment right now, you’re likely interacting with a scammer. Most loans don’t expire after a few hours or days. The scammer is only trying to get you to act without thinking.

Exit the site immediately and change your device’s passwords as an extra precaution.

6. The site isn’t secure 

Whenever money changes hands online, you’ll want to verify that you’re dealing with a legitimate site. The site’s address/URL will give you an easy clue: Look for an “s” after the “http” in the address. If it’s there, the site is secure; if not, back out now!

It’s important to check the site’s security once you hit the homepage. Waiting until you’re ready to submit your information can be too late. Creepy as it may sound, many hackers use keystroke loggers, which record as you type. That means, even if you haven’t submitted your filled-out application, they may already have all the information they need to scam you. If you check for a site’s security as soon as you’ve connected, though, you’ll exit any unsecured sites before you start typing.

7. The lender has no physical address 

Always do a quick online search using the lender’s official name. If it’s legitimate, a search should bring up a physical address and phone number for the company. If the lender’s name doesn’t turn up anything beyond the online world, opt out of the loan immediately.


Are you short on cash? Don’t get scammed – let us help! Call, click, or stop by San Antonio Citizens Federal Credit Union today to learn about our personal loans and other ways we can help keep or put your finances back in the black.