How to Avoid Bad Credit Loan Scams
Having bad credit means you’re going to have a tough time getting a good loan. Many banks won’t even let you in the doors. Well, they’ll probably let you into the doors, and they may even let you use their restroom, but they’re not going to give you a loan.
Unless you have family who can help in the event of an emergency, you’ll have to turn to a bad credit loan. And that’s where many scammers come in. They know your options are limited and they’re shameless enough to take advantage of your desperation. That’s why you have to be always vigilant so you can get the best loan possible without getting ripped off.
Make sure they want to see your credit history.
Even if a lender is willing to loan to people with bad credit (or no credit) they should still be interested in seeing your credit score. It’s a bit suspicious if they aren’t at least curious about your past spending habits. As nationally recognized credit expert Jeanne Kelly (@creditscoop) told us: “Any company that says it doesn’t care about your credit history should be a warning sign. All credible lenders disclose that they will pull your credit report.”
Be aware, however, that not all credit checks are created equal. There are both hard and soft credit checks. A hard credit check will show up on your credit report and can actually make your bad credit even worse. A soft credit check will not show up on your credit report.
It’s a reassuring sign that a potential lender wants to perform a credit check, but you should try and find one who will perform a soft credit check, if at all possible.
A credible bad credit lender should also look for other proof of your ability to pay back the loan, whether it’s checking your bank account or requiring proof of income. Since most lenders use a good credit score as an indication that you’re going to pay back the loan, it’s suspicious if they’re still willing to lend to a person with a bad credit score and no other indication that the loan will be paid back.
Check those reviews.
Like any restaurant, museum, or spa, you want to check multiple online review sites before choosing a lender. Certified financial educator Maggie Germano (@MaggieGermano) emphasized the importance of performing your due diligence: “If you are being approached by a lender, be wary. You’ll want to do research and make sure they’re legitimate. Google the company or person’s name and see what comes up. Be especially on the lookout for complaints or bad reviews.”
Remember to check a wide range of reviews across Google, Facebook, the Better Business Bureau, and sites that specialize in lending reviews. Some scam lenders might try to fake reviews on one or two sites, but if their reviews are consistent across many different internet locations, there’s a better chance the perception reflects reality.
Customer service is a must.
A good lender shouldn’t be trying to hide anything from you. They should have a number you can easily call to have all of your questions answered. If they aren’t willing to give you as much time as you need to feel comfortable, then they don’t deserve your business. And don’t settle for some robot, either. You should be able to talk to a person. The robots haven’t taken over yet!
Any lender who tries to rush you into a decision should be treated with suspicion. If they’re really offering the best loan for your situation, they’d be willing to let you find out what your options are and be certain of your choice.
Look out for their location.
Different states have different lending laws, and you should familiarize yourself with them. Additionally, you should do some research and find out where the lender is located. If they’re located offshore or in First Nations territory, they may not be subject to the usual regulations, and you’re better off finding another lender.
Look out for those fees!
There are legitimate lenders who charge a fee to process your loan, but no lender should be making you pay a fee before you’re approved. According to Sally Elizabeth of Peopleclaim.com (@Peopleclaim): “Scammers will come up with any number of creative excuses for why you need to send them money and more money for that ‘pre-approved loan-insurance,’ the first month’s payment, good-faith payments, getting rid of an unfavorable item on your credit report… you name it. Demands will escalate until you realize you’re being scammed and you’ve lost as much as $2,000.”
A good lender will be willing to tell you EXACTLY how much you’ll have to pay in fees and interest once you’ve been approved, and won’t spring any surprise fees on you.
It’s hard trying to find the best loan possible when you have bad credit, and predatory scam lenders (like payday lenders) don’t make it any better. But by keeping these tips in mind and maintaining the proper skepticism and caution, you’ll be able to get the ideal loan for your situation.
|Sally Elizabeth works for online dispute resolution platform PeopleClaim.com, helping people who are normally shut out of the legal system because of time or money. Weeding scams out from common consumer complaints has taught her way more about scammers than she ever wanted to know.|
|Maggie Germano is a Certified Financial Education Instructor and financial coach for women. Her mission is to give women the support and tools that they need to take control of their money, break the taboo of discussing debt and income, and achieve their goals and dreams. She does this through one-on-one financial coaching, monthly Money Circle gatherings, her weekly Money Monday newsletter, and speaking engagements. To learn more, or to schedule a free discovery call, visit MaggieGermano.com.|
|Jeanne Kelly is an author, speaker, and coach who educates people achieve a higher credit score and understand credit reporting. #HealthyCredit is her motto. As the founder of The Kelly Group in 2000 and the author of The 90-Day Credit Challenge, Jeanne Kelly is a nationally recognized authority on credit consulting and credit score improvement.|