Loan Scams to Avoid

Despite the availability of legit lenders and such of lines of credit for new business, there are some small business owners who fall and are vulnerable to scams. Why?
Almost always, a start-up business will struggle in the first few months of operation. Some may even reach a couple of years. So it’s always advisable that if you have a capital, make it large enough so that you can stay afloat for at least two years granting there are no sales. But this is asking too much. Most businesses would and could never adhere to this. That’s why in many cases, when the business starts flailing, business owners fall for different kinds of scams.
From the outside, it is so easy to question why people fall into loan scams. It’s not always about being dumb, sometimes it’s just desperation. Hope is what makes people go on. And a dash of hope coupled with desperation will make people believe a lot of things. This blog is meant to educate people, especially those vulnerable to scams. So that even during desperate times, at the back of their minds, they will have doubts on the loan offered to them because they have been informed about the different kinds of loan scams.
This is not a warning to businesses only. Anybody who falls short of cash should avoid attractive loan schemes at all cost. But if really necessary, here are some loan scams that should be avoided and tips on how not to fall victim to these schemes.
Online swindlers
To be fair, not all online lenders are fishy. In fact, there are many legitimate online lenders out there. But there are also a whole lot of swindlers so you should be wary. There are many lenders who prey on desperate businesses who often do not have a good-enough credit standing to get a loan from the bank. Sometimes, it’s unfortunate that those who need the loan the most will have a harder time getting it from the banks.
If an online lender is too aggressive, be wary immediately. Do some research about a lender or loan broker. Always ask for an official email address and website. Legitimate online lending businesses have an online presence, which is verifiable. The reputable ones also have an office so always ask for the physical address. Verify licenses and permits as well. Surely, if they go into business with legitimacy in mind, they have gone through the right process — getting the legal permits, etc.
If the lender asks for a down payment, then that should raise a red flag for you. You want a loan precisely because you need money so why should you give them money? When the supposedly lender asks for money, stop right there. Don’t even go as far as giving them your personal or business information.
Fishy student loan lenders
Majority of Americans go to college on a student loan. But the federal loan is for tuition. Students need more than just the tuition. So for those whose parents cannot afford to pay the monthly dues on the dorm or even the daily allowance, then students are forced to find a part-time job. There are also matters like school supplies and technological needs. So in some cases, students resort to getting an off-campus student loan.
If the offer is too good to be true, then it probably is. Don’t ever believe when a lender tells you that you have been “pre-qualified” for a student loan. Ask yourself this question: How did they know I’m qualified. To be qualified, there should be a thorough assessment of your financial standing.
By the way, there is no such thing as an “Obama Loan Forgiveness Program.” There have been many advertisements that carry this tagline or something that sounds like it.
Bad credit loans
If you have bad credit then you are a target among swindlers. Chances are many lenders will be approaching you, sweet talking you to change your fate. They will be prying on your inability to get proper loans from banks and other loan firms. But don’t get your desperation muddle your judgment. You should know that the government frowns upon “advance fee loans.” As mentioned earlier, this is when the company asks for an upfront cost for you to be able to take out a loan.
Another reason why many people fall for the bad credit loan is the lack of collateral. No legitimate lending business will give you the loan without assurance that you will pay it back. This is why reputable businesses will seek out collaterals. Fraudulent lenders, though, will say otherwise.
Home equity loan scam
Some homeowners are enticed to refinance an already refinanced loan because it sounds promising. This scam is usually called a loan flipping. This is how it works: you take out a refinance loan from your mortgage because there are some pressing expenses that need to be settled. But then, a lender will approach you and offer another refinance program. A lot of homeowners fall victim to this because of the cash-out offer. But then, the fees involved are too high. But homeowners don’t usually look at the big picture, they just notice the monthly amortization, which seemed affordable. But once you total all the payments, you’ll realize the fee involved is about 10 percent of the loan amount.
In any of these scams, you only need to do one thing: due diligence. You owe it to yourself to be smart about loans because you will be the only one making sacrifices when you fall victim to scams.
But what if you have already been scammed? What if you have already started your payments on the loan and you realize that it was a scam? Don’t beat yourself up. What’s done is done. Now all you have to do is to stop further damage to your finances. Here are the things you need to do as soon as you realized you have been swindled:
1. End all communications immediately. Stop answering their emails and their calls.
2. Cancel recurring payments. Either you have directly linked this to your bank account or credit card, immediately call the bank and request to stop payments.
3. Report to the police.
4. Talk to some experts about it and get their advice on how to handle the situation and if there’s a possibility you can get your money back.
Always remember to turn to those legit lenders. You may opt for lines of credit for new business that are much safer than loan scams.
