6 Signs of a Personal Loan Scam

When you need to borrow cash, the last thing you want to encounter is a fraudster plotting to steal money from you. But as people increasingly shop for personal loans online, scammers are ready to take advantage.

Consumers reported more than $10 billion in losses to fraud in 2023, according to the Federal Trade Commission. Those reports included imposters and scammers claiming to provide loans in exchange for information or money.

“Separating the legitimate lenders from the fakes can be really hard, and the scammers get better every day at making their pitches look more convincing," says John Breyault, vice president of public policy, telecommunications and fraud at the nonprofit National Consumers League.

Before you provide personal or financial information, here are six signs the loan you’re considering may be a scam.

1. Text messages and robocalls

An out-of-the-blue robocall or text message inviting you to apply for a loan should give you pause, especially if you’ve had no prior contact with the lender.

The borrower usually makes the first move to get a personal loan by pre-qualifying or directly applying. In some cases, your bank or credit card issuer may send you a preapproved loan offer or an online lender may send follow-up emails after you check for offers with them.

But if the message makes you wonder how the lender found you, don’t trust it. Delete suspicious text messages and hang up on robocallers, Breyault says. Even saying “don’t contact me” could signal that you’re likely to respond, so the calls and texts may persist.

2. Advertisements of ‘guaranteed’ approval

A trustworthy lender can't guarantee you'll get a loan without reviewing your credit and finances, so avoid those that promise approval before you’ve even applied, Breyault says.

“Any legitimate lender is going to want to do a credit check on you to know if you’re going to be able to pay them back,” he says.

A high-interest lender may provide a loan with no credit check, but many at least do a soft credit pull and review your bank accounts before approval.

3. No state registration

Lenders are required by law to register in the state where they do business.

So if you have doubts about a lender, check to see if it’s licensed. The Consumer Financial Protection Bureau (CFPB) maintains a list of state bank regulators, and the National Association of Attorneys General has a list of states’ attorneys general, which are good places to start your search.

Just because a lender posts a license on its website doesn’t mean it’s real, Breyault says, so it’s best to confirm.

If you can’t find the license, treat it like a red flag and report it to your state regulator, says Suzanne Martindale, senior deputy commissioner for the consumer financial protection division at the California Department of Financial Protection and Innovation (DFPI).

4. A bad online reputation

Research a lender’s online reputation to confirm (or quell) your suspicions. Enter the company’s name into the CFPB’s complaint database and the Better Business Bureau’s directory to see what others are saying about it, Martindale says.

You can also search online for the lender’s name and the word “scam,” which may surface regulatory actions against a legitimate lender or links to the community website Reddit where other people have shared their experiences. Even California’s DFPI uses Reddit to research companies, Martindale says.

“Online communities do tend to form when there have been red flags, and so it does pay to slow down, think before you click and do a little online research,” she says.

5. No physical address or contact information

A lack of transparency about where or how to get in touch with a lender should give you pause, because it may indicate that you’re working with a scammer who doesn’t want you to follow up.

Most reputable lenders have an email address and a customer service phone number. It’s worth calling the posted number to be sure it’s an answered line.

It should also be easy to find out where a lender is headquartered. A quick scan of the lender’s website or some light online searching should pull up a physical address. If not, move on.

6. Asking for money or gift cards

Legitimate lenders never require payment in exchange for a personal loan. Personal loan scammers may request an Apple or Google Play gift card, or payment via an app like Venmo, Breyault says. Recently, payment requests via cryptocurrency have also become common, he says.

“The fact that you’re being asked to pay is a red flag,” he says, and “the fact that you’re being asked to pay in an unusual way is a really big red flag.”

What to do if you’ve been scammed

Learning you may have been swindled can leave you feeling embarrassed and frustrated, but keep in mind that people make millions of fraud reports each year.

Here are some steps to take if you suspect you’ve been scammed, and ways to find the cash you sought in the first place.