Sara Routhier, Managing Editor and Outreach Director, has professional experience as an educator, SEO specialist, and content marketer. She has over five years of experience in the insurance industry. As a researcher, data nerd, writer, and editor she strives to curate educational, enlightening articles that provide you with the must-know facts and best-kept secrets within the overwhelming world o...

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Joel Ohman is the CEO of a private equity-backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He also has an MBA from the University of South Florida. ...

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Reviewed by Joel Ohman
Founder, CFP®

UPDATED: May 27, 2021

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Summary

  • Personal loan frauds are most often targeted towards people with poor credit
  • It is illegal to offer loans over the phone
  • Be wary of any lenders not interested in your credit history

If you’re someone with poor credit, chances are you’ve had difficulty being approved for a loan.

Unfortunately, there are many people who will try to take advantage of your desperation. That’s why it’s important to learn how to spot bad-credit-loan scams.

If someone approaches you online or on the phone with the offer of low-interest personal loans, stop and think twice. This is likely a scam to steal your money or your personal information.

Keep reading below to learn what bad credit loan scams are, how to spot them, and what to do if you’ve been scammed. Enter your ZIP code into our free comparison tool above to find affordable loans from providers near you.

What are bad credit loan scams?

So what are bad credit loan scams? Well, a bad credit loan scam is a scam that is targeted towards those with poor credit who have had difficulty being approved for a loan.

Who borrows personal loans? Studies have shown over half of personal loan borrowers have poor credit scores. Unfortunately, these people are most often the victims of personal loan frauds and bad credit loans.

Perhaps you’ve found your dream home but are unable to afford it because your credit score has prevented you from getting a mortgage loan. You’ve tried everything you can do to improve your credit score but to no avail.

This is where the scammers come in. Sensing your desperation, they’ll call or email you with the promise of instantly approved personal loans. The offer may sound too good to be true, and this often exactly the case.

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How do I spot bad-credit-loan scams?

You’re probably wondering how to spot bad-credit-loan scams so you can avoid falling prey to personal loan frauds. Here’s what we advise.

The first step in learning how to spot a bad-credit loan scam is not accepting any personal loan offers over the phone.

In fact, it is illegal to make loan offers over the phone so this is a sure sign you are talking with a scammer and not a legitimate lender.

The next thing to look out for are upfront fees. If someone requests money in advance for the promise of a low-interest loan, they’re probably a scammer.

Legitimate lenders will disclose any fees associated with a loan and those fees will usually be wrapped up in the cost of the loan, not paid for in advance.

Another thing to be wary of is if the person offering the loan isn’t interested in your credit history. Legitimate lenders will always want to review your credit history to make sure you’re a responsible borrower.

If the person offering the loan promises instant approval without a credit check that’s a sure sign of a scam.

Finally, research the name of the company in question. Are they registered in your state?

If not, this could be a cause for concern. Search the company name online through the Better Business Bureau and look for any bad reviews or signs of fraudulent activity.

What do I do if I’ve been scammed?

If you’re the victim of loan scams or personal loan frauds, you’ll want to contact local law enforcement as soon as possible.

You can also contact your state attorney general’s office and let them know you’ve been the victim of a scam.

The attorney general may already have experience with the people who scammed you and can use your experience to help prosecute them.

Additionally, you can file a report with the Internet Crime Complaint Center, the National White Collar Crime Center, or the Bureau of Justice Assistance. They may be able to provide you with a list of fake loan companies.

Make sure to include any identifying information such as emails, phone numbers, and web addresses used by the scammers so that law enforcement can track them down.

Now that you know how to spot bad-credit-loan scams you can be more prepared when searching for a loan. Enter your ZIP code into our free comparison tool below to compare interest rates from lenders in your area.