5 Ways to Spot a Loan ScamSep 25, 2014 Blog Personal Finance
We’ve all been in the unpleasant situation where we’re short of cash, and to make matters worse, pay day is still days – or weeks – away. If you need a short-term loan for a last minute emergency, proceed with caution. Unscrupulous lenders abound, waiting to take advantage of people who’re in a tight spot. In order to avoid falling prey to a scam, look out for these five red-flags before putting the money that you do have, in jeopardy:
1. Always Read the Small Print
Scammers make their money by charging you exorbitant fees that have been hidden in legal jargon. If you don’t understand the loan agreement that you’re asked to sign, ask questions until you’re absolutely clear on the term and conditions. If a company dodges your enquiries, or gives you answers that don’t seem to add up, walk away.
2. Pay Now, Regret Later
A legitimate financial institution will never ask you to pay anything up front. Many loan scams fool people into sending them money for “processing’ or ‘administration’ fees. Once they receive your payment, they’ll do a runner – leaving you in even more debt.
3. Congratulations! You’re About To Get Scammed!
We’ve all received those SMSs informing us that we’re eligible for a pre-approved loan. Unfortunately, these are downright lies. Reputable lenders will never approve you for a loan without running a full background check on your credit history, as well as verifying your financial standing via references.
4. Your Secret is Safe With Me
If anyone asks for personal financial information over the phone or internet, run. Scammers will try to obtain details like your identity number, credit card details and even your ATM PIN code. Besides putting your money at risk, this makes you vulnerable to identity theft – a problem that’s rife in South Africa.
5. The Number You Have Dialled Does Not Exist
If a company has no contact details, it’s guaranteed that they’re bogus. Reputable financial institutions will always provide you with the email and telephone number of a customer support line. If a company claims to be having email or telephone problems when you attempt to contact them, they’re most probably unscrupulous.
Got it? Good!
The best way to go about obtaining a short term loan, without putting yourself at risk of being scammed, is via peer-to-peer lending. This practice works by connecting those in need of a short term loan with investors who’re able to provide them with the necessary finance. Companies like Rainfin offer low interest rates, speedy processing of applications and free credit advice to boot.