Canadians are losing millions to bogus lenders. Can you identify the loan scam?

Knowing the signs of a loan scam could prevent you from falling prey to shady lenders

Loan scams are frequent in Canadian communities big and small, including Estevan, putting a large population at risk each year of having their money stolen.

In fact, the Better Business Bureau of Canada announced that people across the nation have lost millions of dollars to various types of financial scams over the past two years.

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The scary part?

Getting your money back after a scam situation is rare. The price for a simple mistake is high.

Canadians depend on loans

For those struggling with finances, having access to lenders can be life-changing. It could mean the difference between paying the bills and putting food on the table – or not.

Cue private online loan vendors.

Because web-based resources are more willing to help people experiencing financial issues or those who were denied loans from traditional branches, private online vendors have improved the financial landscape for many.  

However, there has been an increase in online loan vendors, which has also spurred the number of personal loan fraud cases. Recognizing the common signs of fraud can be the easiest and best defence against crooked lenders.

How to spot a loan scam?

Lender asks for money upfront

A recent Loans Canada survey determined that nearly 45 per cent of credit-constrained Canadians who consider themselves financially savvy agree that alternative or online lenders are authorized to ask for upfront payment because it adds additional security.

This could be a costly mishap.

Licensed lenders will never demand money upfront. Often bogus lenders will request a processing or insurance fee as a condition for approval. Don’t buy into this. Being asked to pay money via e-transfer, credit card, Western Union transfers as a method to secure a loan is a red flag.

Promise of a guaranteed approval

Nothing in life is guaranteed, including loan approvals. A legitimate lender will verify applicant information and evaluate creditworthiness before sealing the deal. Guaranteed approval is a method of luring applicants to collect upfront fees.

Find out why guaranteed approval is a scam here.

Putting the pressure on

Scammers will often put pressure on loan applicants to commit quickly. This leaves little time for people to realize they’re being swindled. Be wary of any tight expiration dates as they can be a sign of a scam.

Do they even exist?

Loans Canada’s survey also reveals that credit-constrained Canadians rarely call vendors to ask questions and do further research when taking out a loan. 

Lack of presence in the real world is a sign that something might be awry. Look for independent information on the lender and double-checkif they have an actual office with a legitimate address.

Knowledge is the best line of defence

Loans Canada recommends researching lenders, looking for verified sources for reviews and even discussing applying for loans with trusted friends or family members. These are all ways that Canadians can arm themselves with more information, which will ultimately help them avoid falling for a loan scam.

“Over the last few years we have seen an increase in loan fraud,” says Loans Canada Chief Technology Officer, Cris Ravazzano. “Loan scammers are impersonating many online lenders and similar websites, tricking Canadians into paying to qualify for fraudulent loans. We want to bring awareness to this issue to help inform and protect potential victims of this fraud.”

I think I’ve been scammed. Now what?

If you’re among the thousands of people scammed each year, unfortunately, there isn’t much you can do after the fact. However, if you’re suspicious that a lender might be trying to defraud you, contact your local police and the Canadian Anti-Fraud Centre

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