As Coronavirus symptoms spread widely and rapidly, more and more individuals and businesses are being forced to seek out loans so that they can keep the lights on. The new COVID bill has increased the availability of funding for small businesses, but the truth is that the rush of applications has left many businesses at a loose end while the fine print dries. Then there are the individuals who are in need of support, most of whom are waiting for their stimulus check just to catch up on late bills and put food on the table. The sad truth of it is that many homes live paycheck to paycheck these days and that means that lockdown regulations have left many people in dire situations. Dire situations are never a good thing, but they’re even worse when you are desperately seeking loans or credit cards to tide you over. Unfortunately, there are a good many unscrupulous people and businesses out there looking to take advantage of such desperation and this can be the snowball that causes an avalanche.
Coronavirus Symptoms Causing Building Debt? Watch For Lending Scams!
As desperation increases so does the willingness to overlook that gut feeling that usually steers us away from bad decisions. Scam artists are more than willing to take advantage of that vulnerability, though, and that gives rise to lending scams. Today I want to cover a few red flags that you can watch out for when it comes to this type of scam.
There is such a thing as secured loans or credit cards, but these are not the same as someone offering you a loan for a prepayment. Think back to the Prince of Nigeria scam – if you send me money first, I’ll then send you more money back. In reality, these scam artists take the money and run. Unfortunately, many elderly folks are targeted for this type of scam and many wind up losing a small fortune.
Any time you are asked to prepay anything before receiving your loan consider this…
Are you being asked for prepayment by a person or are you being asked for a deposit for a secured credit card? The difference is that a secured credit card works similarly to a pre-paid card and the money that you pay establishes the credit available to you. These types of cards are used to build credit.
Are you being asked for prepayment or are you being asked for collateral for a secured loan? A secured loan is offered based on collateral that can be used as payment if required. So for example, you may take a loan of $10,000 with your new car as collateral. Collateral is NEVER taken before a loan is given or even when the loan is given. Collateral only changes hands if you are unable to pay back your loan.
Reputable or Fly By Night Businesses
Something else to watch out for is the loan company that pops up overnight and offers you a loan. Any type of loan – payday or mortgage and everything in between – should be from a reputable and established lender ONLY. This can be a problem for individuals with bad credit who find it difficult to secure loans. For these people, any loan looks appetizing because it offers the opportunity to catch up on bills or put food on the table. Unfortunately, doing business with a fly by night business can easily result in you losing money and assets or even being taken to court if you fail to fully read the small print in your contract. I recommend always seeking advice from a banking institution or lender who has an established name or reputation and avoiding anywhere that advertises “quick cash fast” because they very often prove to sink you into more debt in the long-run.
If you have been offered a loan and you are unsure whether the offer is legitimate or whether it is a scam, you can speak with a live government agent online or if you know of a confirmed or suspected scam, you can report that on the U.S. Scams and Fraud site.
Unregistered Loan Providers
The FTC demands that all loan providers register in states where they will be conducting business. One of the easiest ways to identify a scam loan company is to verify whether or not the loan company is registered to do business in your state. The best way to verify this information is to contact your state attorney general’s office. Some resources suggest checking a lender’s website to see whether or not the lender is permitted to practice in your state, but I don’t recommend this simply because anyone can make a website say anything they like these days and there’s no guarantee that it’s true!
What If You Have Been Scammed?
If you have already been scammed by a loan company, it’s important that you take action immediately. Begin by contacting local authorities and reporting every detail of your situation. This will begin a record of crimes by the scammer if there is not one already in the system. This will help to get the ball rolling on a fraud case or it will contribute as evidence to an existing fraud case.
You should also seek advice from a fraud attorney. Each state has their own applicable laws when it comes to loan fraud and a fraud attorney will be able to explain your state’s laws as well as guide you through the legal process so that a favorable outcome for your case is more likely.