In recent times, it has become exceedingly easy to secure personal loans. But with this ease also comes risk on the part of the borrower.
Unsuspecting Nigerians get defrauded by unscrupulous entities. And believe it or not, these scams have become incredibly rife. So in this article, we’ll reveal the various types of loan scams and how to identify and avoid them.
What Are The Types Of Loan Scams?
Here are the 7 common types of loan scams to watch out for:
- Online lending scams.
- Phishing scam.
- Debt relief scam.
- First contact scam.
- Imposter scam.
- Full-guarantee scam.
- Upfront fee scam.
Online Lending Scams
Some malicious platforms pose as loan providers but in fact, are out to collect the personal information of applicants. The stolen information is then sold to a third party, or used to gain access to the victims’ bank accounts.
Debt Relief Scam
Some scam artists claim to help businesses and individuals pay off lump-sum debts so as to allow them more time to settle. The service is offered at a cost which the benefactor has to pay upfront. However, as soon as the fee is paid, the scammers vanish.
Upfront Fee Scam
It is often not unusual for lenders to demand insurance, origination, and other loan processing fees. These fees vary depending on the lender. However, some scammers manage to defraud people by collecting these fees and then failing to issue the loan.
Some fraudsters pose as a lending institutions, and when people apply for a loan, they collect the information provided by these applicants and use them to take loans in their name, thus leaving the victim with huge amounts of debt.
It is standard procedure for lenders to assess the creditworthiness of applicants by consulting with a credit bureau, such as the CRC Credit Bureau.
And if they find the credit report of the applicant to be lacking, they will deny the application and not issue the loan.
However, some entities lure in desperate individuals who have poor credit reports with the promise of a loan guarantee. The applicant is made to pay a fee to ensure that their application will be granted. But they end up getting defrauded.
Fraudsters contact potential borrowers and claim to be a legitimate financial institution. They then ask for bank account details and security pins if the victim expresses their interest in taking the loan. Should the person be fool enough to give them the information, they get duped.
First Contact Scams
This is where individuals are approached by unknown bodies with juicy loan offers without having first applied for any loan. This usually happens through phone calls, SMS, and various online channels.
How To Stay Safe From Loan Scams?
There are some warning signs that will enable you to quickly identify fraudsters. Furthermore, you should follow some safety measures to ensure that you do not fall prey:
- If there are any fees that come with processing the loan, request for the fees to be deducted from the actual loan amount at the time of disbursement, rather than opting to pay the fees upfront.
- No legitimate lender will pressure you into taking a loan. Always ensure that you are presented with standard terms and conditions. And beware of lenders and loan offers that seem too good to be true.
- Legitimate financial institutions will always check your credit history before approving your loan. Therefore, any lender that promises you a 100% approval rate, has no clear repayment terms, or that shows no interest in verifying your credit report is probably a scam attempt.
- Always check for online reviews, and ensure that the establishment is well-known.
- Only scammers will ask for information on your ATM card or other such sensitive details during the loan application process. The standard information that is required for a loan application includes:
- Proof of identity: Name, age, address, phone number, ID card, BVN.
- Proof of income: 6 months bank statement report.
- Utility bills: rent, PHCN bills, or water bills.
- Credit report (Which the lender usually obtains from the credit bureau).
6. Avoid unregistered lenders. Legitimate lenders are insured by the Nigeria Deposit Insurance Corporation (NDIC) and regulated by the Central Bank of Nigeria.
If by any chance you’ve already been entangled in suspicious dealings, be sure to report the issue to your bank immediately, and also take the case to the Economic and Financial Crimes Commission (EFCC).