A loan can help cover an unexpected expense, consolidate debt or pay for a major purchase. But scammers know people looking for a loan may be focused on getting approved quickly or drawn in by an unusually low rate. They use that urgency to steal upfront payments, personal information or both.
Before you apply, here are common lending scams to watch for and simple ways to protect yourself.
1. Advance-Fee Loan Scam
A lender says your loan is approved, but first you need to pay a processing, insurance or application fee. The payment may be requested by wire transfer, gift card, cryptocurrency or payment app. Once you pay, the loan never arrives and the scammer disappears.
How To Avoid It: Don't pay a fee in exchange for a guarantee that you'll receive a loan. Verify the lender independently and review all costs and terms in writing before sharing information or sending money.
2. Guaranteed Approval Offer
An ad, email or text promises a loan regardless of your credit history, income or ability to repay. The scammer may use phrases such as "no credit check" or "100% approved" to get your attention, then ask for money or personal financial information.
How To Avoid It: Be cautious when approval sounds automatic. Legitimate lenders review your information before granting final approval. Compare offers and confirm that the lender is licensed or authorized to do business in your state.
3. Fake Lender Website or Impostor
Scammers create convincing websites, ads and messages that copy the name, logo or contact information of a real financial institution. Their goal is to collect your Social Security number, bank account details, login information or payment.
How To Avoid It: Don't use a link from an unexpected message or online ad. Type the lender's web address into your browser or call a trusted number you looked up yourself. Check the address carefully for misspellings or extra words.
4. Debt Relief or Loan Forgiveness Promise
A company says it can quickly lower your payments, settle your debt or erase a student loan for a fee. It may claim to have a special government connection or a limited-time program. Some scammers also tell you to stop paying your lender and send payments to them instead.
How To Avoid It: Don't pay upfront for debt relief or trust a guarantee that debt will disappear. Contact your lender or loan servicer directly to discuss your options. For federal student loans, get information through the official federal student aid website and never share your account password.
5. Mortgage Closing or Loan-Payoff Switch
A scammer poses as a real estate agent, title company, lender or loan servicer and sends new wiring or payoff instructions. The message may arrive just before a closing or payment deadline, when a last-minute change can seem believable.
How To Avoid It: Treat any change to payment instructions as a red flag. Confirm the details with a trusted contact using a phone number you already have, not one included in the message. Never send funds until you've verified where the money is going.
Before You Say Yes Checklist
- Slow down. A real lender won't pressure you to act before you understand the offer.
- Confirm your information was reviewed. Be cautious if approval is guaranteed without considering your credit history, income or ability to repay.
- Read the full terms and disclosures. Make sure the rate, fees, payment amount and repayment schedule are clearly provided in writing before you commit.
- Research the lender. Verify its physical address, contact information and license, if required, using sources you find independently.
- Protect your information. Don't share account passwords, verification codes or sensitive details in response to an unexpected message.
- Question unusual payments. Gift cards, cryptocurrency and person-to-person payments aren't normal ways to pay a lender.
If You Think You've Been Scammed
Act quickly. Contact your financial institution or payment provider to report the transaction and find out whether any funds can still be stopped or recovered. Recovery isn't guaranteed, especially after a wire transfer, but the sooner you report it, the better. Change any passwords you shared, monitor your accounts and credit reports, and report the scam to the Federal Trade Commission and the appropriate state regulator. If your personal information was exposed, report the identity theft and follow the recommended recovery steps.
Take Time To Verify Before You Borrow
A legitimate lender should give you time to ask questions, compare choices and understand what you're agreeing to. When an offer depends on secrecy, pressure, guaranteed approval or money upfront, step away and verify it. A few extra minutes now can help protect your money and personal information later.