Warning! 6 Signs of Online Personal Loan Scamming

online loan scam

Online loan scams remain a threat to many borrowers. In fact, it has never been worse than during this time of the coronavirus crisis, where people are using the Internet more and, at the same time, suffering from financial hardships

Financial scammers are exploiting the idea that online lenders usually cater to borrowers’ needs that aren’t granted by banks or credit unions. Like any online lender, these scammers will profess to lend you money. But, in actuality, they’re just going to sniff out your personal information and take your money away illicitly. 

But how can one steer clear of these unscrupulous online lenders? We’ve rounded up six ways to spot an online personal loan scam. 

1. Unregistered Company

Reputable lending companies and brokers must register for a license in the state where they operate a business, as required by the Federal Trade Commission (FTC). Otherwise, the lender may potentially be a scammer. 

But how do you check whether a lending company is legally running a business or not? Visit the lender’s website and check whether they have a list of places where they legally operate a business. 

If you see that they’re legally operating in some places but not in your state, verify the company’s business with your state’s attorney general’s office, Department of Financial Regulation, or Department of Banking.

These entities can confirm whether a lending company is licensed to operate in your state or not. Choose a reputable online lender like PaydayPot if you need a loan right away.

2. No Physical Address 

Scammers also pretend to be a branch of a reputable financial institution. To look more professional and legitimate, these scammers will create websites and produce forged paperwork almost 100% identical to the lending company they’re copying.  

How can you distinguish a fictitious lending company from a legit one? Check their physical addresses. Most reputable lenders tend to plug their addresses into Google Maps, while scammers would rather be untraceable to avoid legal consequences. 

However, other scammers are getting smarter and will list their made-up addresses on vacant lots. To avoid getting outsmarted, verify a lending company with a local state agency responsible for overseeing any financial institutions’ operations.

3. No Credit Checks Required 

Like any reputable lending company that offers loans for people with bad credit, loan scammers also target high-risk borrowers, especially those who tend to make late and partial payments. 

Bad-credit loan scammers require no credit checks and seem uninterested in timely repayment. But the truth is, you will incur excessively high penalties if you fall behind your payments. Other scammers don’t run credit checks because they’re not after your creditworthiness but your personal information.

4. Unsecured Websites 

If a lender’s website doesn’t have a padlock symbol on the search bar (where you can find the page link), that means it isn’t secured. Moreover, a page isn’t secured if the page’s address starts with “HTTP” instead of “HTTPS.” The added “s” after “http” stands for “secure.” Having a secured website means the lender is concerned about the site’s integrity. 

If you notice, my site also has a padlock before the website address:

https secure website

Conversely, an unsecured website could mean the lender exposes a consumer’s personal information to identity thieves. At worst, the lending company itself is deliberately exposing your information as part of a loan scam. 

Before inputting your personal information on a lender’s website, see to it that there are security indicators like the padlock symbol and “https” on the site’s address. It doesn’t only indicate that the site is secure, but also means that you’re dealing with a reputable company. 

5. Upfront Fees 

When a lender demands upfront fees for insurance, collateral, origination, processing, or paperwork before a personal loan is disbursed, it’s a scam. Reputable lenders may charge you fees, but they would be directly deducted from your loan amount. 

Often, scammers would ask for your prepaid debit card since it’s as untraceable as hard cash. Even worse, once you provide your prepaid debit card to a scammer, you cannot report it as “stolen” since you voluntarily give it to a scam lender. 

6. Approval Guarantee 

“Guarantees Loan Approval” is among the tell-tale signs of a loan scam. In fact, most lenders, including online companies, would not guarantee 100% approval when it comes to personal loan applications. Any terms that include “guarantee” sounds too good to be true, and it should cause you to think twice.

As mentioned, some bad-credit lenders grant loans regardless of a borrower’s income, credit history, debt, or credit score. With that said, approvals are always determined on a case-by-case basis. Hence, a lender never guarantees loan approval upfront. 


Scammers and fraudsters are having a heyday amid the global coronavirus crisis. They are, without a doubt, opportunistic, taking advantage of every person in vulnerable circumstances that they can. If you plan to take out an online personal loan, make sure that the lender you’re dealing with is legitimate before signing on the dotted lines. 

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