Loan Scams Can Be the Death of You Financially – Here’s What You Need to Know
Back in 2017, there was a 10% drop in loan scam complaints as well as fraud. The Federal Trade Commission reported in the US that American consumers had lost a whopping $905 million to scammers, which was $63 million above that recorded in 2016. While a reduction in complaints is because more emphasis was place don educating people on scams, raising awareness of them, and enforcing regulations to reduce fraud, there were still millions of dollars being sunk owing to scams and fraud.
There have never been more financial scammers than there are today, and these scammers are known to prey on the people who have a history of being denied a loan from banks or registered institutions. This is how they find their targets, and naturally, a person after a loan rejection will be desperate for money. They will be willing to take risky measures to get their hands on it to pay for whatever it is they need the money. A recent study by the University of Pennsylvania Wharton School of Business that seniors are the easiest targets for financial scammers. Still, Baby Boomers and Millenials impacted just as hard. Research further uncovered that one on three adults are victims of financial scammers.
How Scams Work
Scammers either lure their victims by offering them sums of money with many perks, though sometimes they access the information of victims without their knowledge or permission. There are so many legitimate ways to get money, like adjustable mortgages, ETFs, brokerage accounts, borrowing from your 401K, variable-rate mortgages, and even payday lenders. Still, all of these platforms only make for more financial scamming as well. Online banking and processing of money and transactions have made scams even more prevalent.
Loans to Avoid
You have to be aware that some investments are simply mutton dressed as lam – they are financial traps. Firstly, a car title loan – these types of loans use your vehicle as collateral, and you walk away with, generally, 50% of the vehicle’s value. Interest rates on such loans are typically 25 per month, and the full payment for this is usually to be made within 30 days of taking the loan. There are occasions when the amount is carried forward by another month, but the bottom line is that you can lose your car and end up paying far too much in interest. The government has even passed laws that limit this loan, which alone speaks volumes for why you should avoid them. Pawnshop loans work on a similar principle, and you should stay away from them too!
Cash advance loans and overdraft protection loans are two more types of loans that you should avoid. These loans will place you in a whole lot of debt, and if you don’t have money, to begin with, debt is the last thing you need. Turn to these in matters of extreme emergency only. Private student loans are another loan to avoid as the interest rates are usually far higher than the fixed federal standards, and the private institutions have variable rates, which doesn’t spell well for you financially.
Warning Signs of Scams
Victims point out some warning signs to spot scammers. First of these are up-front fees. If a lender asks for you to send them money without disclosing the fees, this should ring warning bells in your head already. Legitimate lenders disclose all payments to borrowers, and these fees are generally rolled into the cost of the loan. Secondly, phone offers are illegal. All offers have to be in writing. Thirdly, wire transfers for fees are a raise for concern. You should never agree to wire money to anybody. It is safest to ask for a physical address if necessary. Lastly, if the lender is not at all interested in your credit history, it is highly likely that you are not dealing with a legitimate lender.
Ultimately, you have to do your research before entering into any agreements, and always verify whether a business is legitimate before you engage in any business with them. Of course, it is most advisable not to take a loan at all, but we understand that sometimes there are emergencies, and there are instances where there is no option. Be careful, be smart, and be vigilant!
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