If you’re strapped for cash, the offer of a personal loan may seem like just the break you need to hold you over, particularly if your credit is not so great. But be careful. Fraudsters use the frustration and desperation of those with cash and credit problems to trick them into sophisticated personal loan scams.
There are a handful of common personal loan scams to be aware of. Of course, there are some tell-tale signs that separate the scams from the real deal. Below is an overview of some common scams and some red flags that are a dead giveaway.
Scam #1 – Advance Fee Loans
This scam is all about trying to get people to pay an advance fee at the time of loan approval. The scenario goes something like this: You see a compelling advertisement that guarantees loan approvals for good or bad credit.
Motivated by the ad, you submit the requested loan information and supporting documents as part of your loan application. A few hours or days later, a friendly and polite telephone caller responds with the good news. The loan has been approved, but an insurance fee, processing fee or three months advance payment is needed before the loan is released and the check delivered. You’re asked to pay the fee immediately through electronic transfer of the money.
Elated by the news of your loan approval, you wire the money. The money you wired is picked-up by the “loan” broker, but the promised loan never arrives and the up front fee paid by the consumer (which can total several thousand dollars) is lost.
In the best case scenario, this is a legitimate broker who tried to get you approved for a loan but failed. They may have some small fee as part of their loan brokerage process to offset their marketing costs. However, if it was a legitimate broker, they would disclose their fees clearly and early in the process and they would never communicate that your loan was approved. Over the past few years, many states have enacted legislation prohibiting loan brokers from charging an advance fee. So this should be an uncommon scenario.
Loans where documentation is restricted to the merits of any one file based solely on Loan-to-value, credit rating, and clear title. Hence no income, asset, or supplimentary (employment, rental, retirement, etc.) documentation is required to satisfy underwriting guidelines.
There are a number of loan repayment options available to U.S. federal student loan borrowers, including some that are based on the borrower’s income. Income-Contingent Repayment (ICR) is available through the U.S. Department of Education for federal student loans in the Direct Loan program (DL).
ICR is designed to make repaying education loans...
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