Here are some warning signs that you are being targeted by an Advance Fee Fraud loan scammer.
If you receive an unsolicited phone call, email or letter offering you a loan, be wary. Especially if it is from a company that you have never dealt with in the past. Legitimate lenders have to follow the regulations of the country that they are operating in and these will almost always contain rules on “cold calling” and the format/content of any advertising material (a letter or email contacting you offering a loan would be classed as advertising material).
Lack of/poor contact details
Whether it is an email or a website that you have been directed to, be particularly wary if there are no real details of the business contacting you. Legitimate companies (even those operating online) will have a physical presence somewhere. If the email or website has no company name or address then it should be an immediate red flag. Financial Services regulation also usually stipulate that regulated companies must give their registration details as well. The form of contact on a website should also be considered a warning sign. Legitimate businesses will give a multitude of ways to contact them, not just an email address or a contact form.
A major red flag is the email address used. Legitiamte lenders do not use free email addresses such as those from Google, Yahoo or Microsoft. They also don’t send out emails from totally unrelated email addresses, asking you to reply to a different address.
You should also be wary of anyone who claims to be a “private lender” or able to offer loans worldwide. Each country (and State in the case of the USA) regulates who can undertake financial services business in their territory and one of the requirements is usually that the company has a physical presence in the territory. So, if you are in the UK, someone claiming to be located in India, Nigeria, or even the USA would not be able to offer you a loan. Always check with the financial regulators in your country if the person/business approaching you is registerted with them.
Many scam emails originate from countries where English is not the first language, and will often include spelling mistakes or poor grammer. Even if the spelling and grammar are perfect, because the scammers are from a different culture or lack experience of working in professional environments, they will often lack the professionalism expected. For example, they may use slang or be overtly religious in nature.
Legitimate lenders always “underwrite” a loan by considering your credit history and affordability. They don’t write out offering guaranteed loans of any amount regardless of the state of your credit history. They will want to be sure that the risk of you defaulting on the loan is minimised.
Scammers don’t need to worry about credit checks or whether you can afford to repay the loan as they have no intention of lending you the money, so it is irrelevent to them whether you have a 100% perfect credit history, a mountain of debt and defaults or are even bankrupt. All they are interested in is the money they can take from you.
“Too good to be true” interest rates.
Even in today’s environment of low interest rates, the headline rates for most lenders are around about 3.4% – 4% APR. These are the rates that banks would give to the best borrowers, those with a spotless crdit history. If you have a poor credit history, if they were to even offer you a loan, you would probably be looking at a rate of double that or more. Loan scammers on the other hand will offer interst rates of 1 or 2% to everyone, regardless of their credit history.
The financial services regulaiton in the majority of countries do not allow lenders to charge money upfront to borrowers. Any charges will be added to the loan capital or in some cases taken as part of the first payment after the loan has been paid.
Anyone asking you to pay a fee to get a loan, regardles of whether they tell you it is to cover “processing”, “application”, “insurance”, “tax” or the “first month’s payment” should be considered a scammer.
Even more of a red flag is if the payments are to be made to someone in another country (particularly know fraud hotspots such as West Africa or India) or by a method such as Western Union, Moneygram, PayPal, Bitcoin, pre-paid cards such as iTunes or bank transfer to an account in the name of an individual.
Legitimate lenders will not rush you to make a decision or pressurise you by telling you it is a limited time offer. They will also not send yiou repeated reminders asking if you still want the loan (often months after your initial application),