You need to trust somebody when handling money with them, which means you should find a reputable loan company that won’t mishandle your money or offers you unfair terms for your loan. When a loan company has a good reputation, you can be sure that the business they conduct is legitimate.

Here you’ll find out how to verify when a loan company is real, so you’ll be able to take out a loan and properly pay it back without falling prey to predatory business practices. To find out more about loans, from informational resources, calculators, and personal loan offers, check out

Loan Scams

One of the best ways to find reputable loan companies is to know a bad one when you see it. To do that, let’s start with how loan scams work with some examples.

Loan scams typically prey on the borrower’s poor finances. This is usually through pre-existing debt, sudden loss of job or inability to pay bills, or a low credit score from prior shortcomings. The scammers may contact them first via email or text messages.

The scams offer quick solutions to a borrower’s complicated problems, masquerading as legitimate loans. The first red flag would be if they ask for money for “legal fees” or “admin costs” which legitimate loan companies never do. Once you have paid, they often disappear and can’t be brought to justice.

Look for the following warning signs when dealing with loan companies:

  • The lender doesn’t ask for (or check) the borrower’s credit history.
  • The lender demands upfront payment before dispensing the loan.
  • The lender contacts you and says that you have been preapproved for the loan, despite never applying for it.
  • Their website isn’t secure. Most search engines and free antivirus software will pick up on this. Look for HTTPS in the URL instead of just HTTP.
  • Their website and other correspondence may have spelling and/or grammar mistakes.
  • Their website will request your social security number. Never give it away.
  • The lender applies pressure to rush you into making a decision.
  • The lender does not disclose the interest rate and additional fees before you commit to any decision. This is against the Truth In Lending Act.
  • The lender guarantees you’ll be approved. Legitimate lenders aren’t desperate for your money and can comfortably turn borrowers away.
  • The lender has no physical address registered for the business. Ask for a physical address, phone number, and other relevant contact details.
  • Remember that if a loan sounds too good to be true, it often is

As for some examples of loan fraud, you should watch out for the following:

Fee Scams

Desperate borrowers tend to fall victim to loan fees or advanced fee scams. These are where you’re tricked into paying upfront or paying more than you typically would through additional undisclosed fees, with no recourse once you have been scammed.

Debt Consolidation

Debt consolidation programs offer consumers the ability to combine the pre-existing debt into one easily manageable loan with a single monthly premium. While that sounds appealing to the financially overwhelmed, scams often claim they can decrease your debt by a lot to help you out. The scams are used to harvest personal and financial details for identity/loan fraud.

Legitimate debt consolidation can be achieved at banking facilities, which are much easier to verify.

False Student Loan Forgiveness

This is where you are contacted for student loan forgiveness and asked to pay a one-time fee. Actual loan forgiveness is very strictly regulated by federal student loan servicers and some requirements need to be met, such as having paid consistently over time.

You should never divulge your FSA ID or the accompanying password(s) to anybody, especially if you’re being asked to provide that information.

Finding Reputable Loan Companies

Now that we know what scams to look out for, here are some of the things that everybody should do when soliciting a loan company. Even when a company isn’t an outright scam, there are warning signs that may point to a legitimate company having poor business practices, increasing the likelihood you’ll have a bad experience with them.

The State Attorney General’s Office

Your first port of call should be the State Attorney General’s office, where lenders are legally obliged to register. The same can be said for the SEC, so you may be able to contact them but they are often busy frying bigger fish, so correspondence can take some time.

Other Contact Information

You can also find more contact information from the Department of Financial Regulation or the Department of Banking, who should store personal loan company information for each state in the union.

You should also turn to the Internet, where proper loan companies will have an active presence. The Internet is where a lot of marketing happens nowadays, so legitimate businesses strive to have a strong brand presence online to find more customers. If you can’t find anything about a loan company online, this is a red flag.

Speaking of contact information, lenders will ask for your banking information but never your login details like your PIN.

Online Reviews

While you’re on the Internet, you should look for previous customers of the loan company. This proves they do what they say and that they offer acceptable terms that other people have used before. The Better Business Bureau, or BBB, is a great resource for finding legitimate loan companies online.

There you can find aggregates of reviews for the loan companies. If the majority of reviews are negative then maybe you’re better off doing business somewhere else, even if the company is legitimate.

Origination Fees

While a scam will ask for upfront payment or heap on additional undisclosed fees, the admin fees related to taking out a legitimate loan are typically subtracted from your borrowed amount. This means you get your money, the loan company covers their initial costs, and everybody is aware of the situation and the expectations surrounding how the loan is awarded and then paid off.

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