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: Jun 25, 2012

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Personal lending is just as vulnerable to crimes of fraud as any other industry. Personal loans fraud is any type of crime or misrepresentation that involves personal lending between a borrower and a lender. Remaining knowledgeable about what to look for is an important practice that can save time and money when facing off against lending fraud criminals.

An example of personal lending fraud would be a lender who requires advance payment from the borrower and then disappears after the advance payment is made. Borrowers can avoid situations like this by remembering that it is a violation of Federal Trade Commission rules for lenders to require that fees be paid in advance of personal loans being lent.

The following are some additional red flags that prospective borrowers should keep an eye out for.

  • Borrowers should avoid accepting any personal loans that are offered from unsolicited phone calls, letters, or e-mails.
  • Revealing personal information to an inquiring lender over the phone or through email can leave a prospective borrower vulnerable to identity theft.
  • It is incredibly suspicious for a lender to ask prospective borrowers to send money via Western Union or MoneyGram since these options leave very little recourse for borrowers to get their funds back in the event a fraudster flees.
  • Watch out for the charging of exorbitant fees for applying or processing applications. Prospective borrowers with bad credit scores are especially vulnerable to personal lending fraud since lenders may try to manipulate their desperation for loans and their limited options.
  • Scamming lenders often advertise a willingness to accept any borrower with minimal to no paperwork.
  • Borrowers asked by a personal loans lender to lie about income, employment status, credit scores, or expenses and other qualifying information should be avoided at all costs.

Thanks to the ease of creating websites as well as internet anonymity, more fraudsters are preying on borrowers online than ever before.

Borrowers who think they may have been victims of personal lending fraud can file a complaint with the FBI’s and NW3C’s Internet Crime Complaint Center.

Despite these risks, however, prospective borrowers should not be afraid to seek personal loans that can help them purchase what they want or need. Using trusted and credible sources makes it easier than ever to obtain a personal lending quote so prospective borrowers can know and consider their options before proceeding to any formal application.