Fraudulent loan scams are becoming too common in Canadian communities big and small, putting many at risk each year of having their hard-earned money stolen.
In fact, the Better Business Bureau of Canada reports that people across the country have lost millions of dollars to all types of financial scams over the past two years.
Recouping lost money from a scam is rare. This is a high price to pay for a simple mistake.
Canadians rely on loans
Having access to lenders can be life-changing. For some, loan approval can mean paying the electricity bill and putting food on the table - or not.
Cue private online loan vendors.
Private online vendors have improved the financial landscape for many. Often, these web-based resources are more accessible to people experiencing financial issues or those who have had a loan application denied by mainstream branches to access the funds they need.
The rapid growth in online loan vendors has caused the number of personal loan fraud cases to also rise. Identifying the common signs of a loan scam can be the easiest and best defence against crooked lenders.
How do you know if it’s a loan scam?
You’re asked to pay upfront
A recent Loans Canada survey confirmed that close to 45 per cent of credit-constrained Canadians who consider themselves financially knowledgeable agree that alternative or online lenders are allowed to demand upfront payment because it adds additional security.
This could be a huge mistake.
Licensed lenders will never ask for money upfront. As a condition for approval, fraudulent lenders will often request a processing or insurance fee. Don’t fall for this. Being asked to transfer money as a method to secure a loan is a red flag.
Nothing in life is guaranteed, including loan approvals. A legitimate lender will first verify applicant information and check on creditworthiness before approving a loan. Guaranteed approval is one method of luring applicants to collect upfront fees.
Learn 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 revealed that credit-constrained Canadians seldom contact 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 is not right. Look for independent information on the lender and double-checkif they have a physical office with a legitimate address.
Being informed 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.
“An increase in loan fraud has been seen over the last few years,” says Loans Canada Chief Technology Officer, Cris Ravazzano. “Loan scammers are pretending to be online lenders and similar websites, luring 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.”
Help, I’ve been scammed. Now what?
If you’re among the thousands of Canadians scammed each year, unfortunately, there isn’t a lot you can do once it’s done. However, if you’re suspicious that a lender might be trying to commit fraud, contact your local police and the Canadian Anti-Fraud Centre.