If you have bad credit, it can be difficult to access loans on the best terms. Lenders may refuse to entertain loan applications or offer sub-prime rates because they perceive you to be more likely to default. Being denied of loans can lead you to fall prey to unscrupulous loan companies who promise loans at attractive rates of interest even with bad credit. The main intention of these companies is to trick you into parting with your cash without any loan disbursement at all.
What’s The Typical Bad Credit Company Scam?
These bad credit companies usually engage in very high decibel advertising promising quick loans at attractive rates to even customers with poor credit. The scam usually takes the shape of customers being asked to send a fee as a prerequisite for the loan approval. The amount of the fee depends on the amount of loan being asked for. It is illegal for companies to give loans for fees paid in advance.
The borrowers are fooled because the companies ask for the payment under one of many terms that sound quite authentic, such as loan collateral, loan insurance fee, loan origination fee, etc. Gullible customers send the fee, and then keep waiting for a loan that will never be paid out. By the time, these borrowers realize they have been tricked, it is impossible to locate the company and the money is well and truly gone.
What Are the Signs of a Loan Scam?
If a loan company is asking for an upfront payment, you should be alert to the possibility of a scam. Typically, these bad credit companies promise you the loan without even checking your profile and credit score and without any assurance that you are capable of repayment. One of the signals that it is a scam operation is that the company asks you send the advance payment in some way other than a personal check or by US mail such as MoneyPak. This is because America has very rigorous mail fraud laws, and funds transferred by alternate channels are difficult to trace. Don’t confuse these scammers with payday loans lenders who ask you to give a check for the full repayment at the time of the loan disbursal.
Also, beware of companies that are located in foreign countries like the Caribbean and Canada as many bad credit companies operate from there. Do not deal with companies that ask you for your credit card details or social security number without giving any documentation in writing regarding the loan. Never give out confidential and sensitive information over the phone unless you made the call and that too to a company that you know and trust.
In case you have been scammed, you should inform the police as well as the Attorney General of your state. In case, the company was from another state or country, you should inform the FBI and the Federal Trade Commission. For the benefit of others, you can report the scam to the Better Business Bureau.