How to spot online loan scammers – 10 signs to watch out for

As times have changed, South Africa has also plugged into the internet, and you can now shop, socialise, advertise, and yes, get a loan online. Unfortunately, con artists are also benefiting from technology improvements. 

If you’re looking for a loan, and Google comes up with suspiciously attractive offers, beware, it might be a scam. Of course, every lender out there is looking to make a profit out of you, but some take it a little too far. 

They want to squeeze every single rand out of you or outright rob you of your hard-earned money. These are the ones to watch out for, and you can catch them in the act once you know the ten most telling signs.

No licence and registration number

Does the lender have a registration number on display on their website? Also, check if they operate under the National Credit Act or are regulated by the National Credit Regulator. This increases your chances of dealing with a trusted lender that won’t try to double-cross you.

No transparency

Scam lenders aren’t always honest with all the loan fees and charges you have to pay. They may advertise their loans as cheap only to start adding extra costs to your payments once you accept the loan offer. A legit lender will have all charges on display or disclose all details when asked.

No credit checks

Payday lenders are the only ones who are not interested in your credit report or credit score since they offer short term loans at very high interest rates. All other legitimate lenders will perform a credit check to weed out high-risk borrowers and to protect you from borrowing more than you can afford. 

Even lenders who offer loans for bad credit or loans for the blacklisted will still carry out a soft inquiry to verify your personal and financial details. Online scammers know that people with bad credit will easily fall for a no-credit-check loan offer. 

Such people are also more likely to miss payments, and the scammer can take advantage by charging expensive interest rates and penalty fees.

100% guaranteed loan approval

Scammers specifically target desperate borrowers by promising you an easy application and guaranteed approval. In reality, reputable lenders don’t make such promises since they have to look at your application first before they reject or approve it.

Upfront fees

You should act cautiously if a lender asks you to first pay for application or processing fees before you can get money in your bank account. Usually, any fees or charges will be included in the repayments, and there are no advance fees and certainly no need to send money to anyone.

Bad reviews

Online loan scammers are easily spotted once one of their victims complains about it online. You can learn from the mistakes of others by checking for reviews on various social media platforms and other sites to see if anyone has filed a complaint. 

No professionalism

Lack of professionalism includes spam email with wrong spellings and bad grammar. There’s also terrible customer service where the loan company’s consultants are either unavailable or can’t give you the help you need.

Unsecured website

Online lenders must provide a secure application platform since you’re required to enter your personal information and financial details when applying. Avoid online lenders with unsecured websites. That means they don’t have a padlock symbol on any of their page addresses. 

Also, if the URL starts with http instead of https – the missing ‘s’ stands for secure and might be a warning sign. The scammer might even be pretending to be a legitimate business by cloning a secure website.

No physical address

They may conduct their business online, but reputable financial institutions should also have a brick and mortar presence. The address should be verifiable, so you have a tangible contact if you meet any problems along the way. They should also provide a working phone number where you can speak with a real person.

Aggressive advertising

Online scammers will invest a lot of effort into pushing you to apply and accept their loan offer. They might send endless emails or even offer discounts that are too good to be true and then tell you the offer is only available if you apply immediately. There’s an increased chance that you’ll make a rushed decision that puts you at a disadvantage.

Other traps to look out for

While the following may not exactly be classified as online scams they should be avoided as much as possible:

• Payday loans. These are well known for high interest rates that can trap borrowers in a vicious debt cycle.
• Credit cards. Unless you get one with a low interest rate to help you build your credit or pay for an emergency, credit cards should generally be avoided.
• Overdrafts. Are you tempted to keep withdrawing money from your account even if the balance has gone past zero? Think twice because most banks offer this service at a high price.
• Title loans. You can borrow money using the title to your car as collateral, but the moment you fail to repay the loan, you’ll risk losing the asset.

So, you have been scammed? – Here’s what you can do

Online scammers use every trick up their sleeves to convince you of their legitimacy. Falling for the lie happens to the best of us, and if you have been scammed, you just have to learn from your mistakes and move forward. Besides using the scammer alert signs outlined above to protect yourself, you can also take the following steps:

1. Report the matter to the nearest authorities and provide them with all the relevant details of the scam.
2. Report the matter to the bank if the scammer has placed a debit order on your account, or has your banking information and personal details.
3. Share your reviews of the scammer to warn others.

On the other hand, here’s how to spot a legit online lender

We have looked at the red flags, here are some green flags to look out for when applying for a loan online:

• Verifiable physical address and working contact details;
• Positive online reviews; and
• The financial institution should be a registered credit provider that offers authorised financial services. Credit providers showcased on CompareLoans are all authorised Financial Services Providers.

Conclusion

As long as you stay away from the scammers applying for a loan online offers convenience and many other benefits. If you’re looking for a safer starting point, CompareLoans.co.za is a top South African loan comparison website that helps you compare online loans from various reputable and trusted lenders. It’s easy to get started and get the financial help you need today. 

Photo by Clint Patterson on Unsplash