Spotting Advance-Fee Loan Scams

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Demonstrating once again how everything old is eventually new again, the advance fee loan scam — while having been dormant for a while — is flaring up again. Designed specifically to prey upon people who have had credit problems in the past, this hustle promises access to much needed cash with no intention of providing it whatsoever.

Fortunately, spotting advance fee loan scams is pretty easy to do when you’re aware of how they usually work.

Here’s what you need to know.

How Advance-Fee Loan Scams Work

Simply put, if you’re ever asked to pay a fee to be considered for a loan, or asked to pay a fee before getting a loan, you’re probably dealing with a crook. While legitimate lenders do sometimes have application, appraisal or credit report fees associated with their loans, they are disclosed up front, taken from the loan amount and assessed after the loan is approved and you have the money.

Thus the name “advance-fee” scams.

They want the money before you get the loan.

Here are some common traits of these scams.

They Pop Up Out of Nowhere but Sound Familiar

These scammers often have names very similar to respected organizations, but when you look closely, they’re just a bit off. Look at the promotional materials carefully to determine who’s really behind the offer before responding to any financial services advertisement. Do some digging around on the internet to see what you can find out about the company once you have their name.

Where They Are Registered — If They Are

The law requires lenders and financial services middlemen to register in each state in which they do business. Run the name of the company past the Attorney’s General office in your state to see if they’ve filed. Your state’s Department of Banking or Financial Regulation is another good resource for this purpose.

Telephone Offers Are Bogus

If you find yourself in a telephone conversation with a representative of a lending organization and you’re promised a loan or a credit card in exchange for the payment of an up-front fee — and you consider sending the money — you’re about to get taken.

Similarly, if you’re asked to wire money, send a money order, or do a funds transfer — ditto. These people know you’ll have little recourse once the money is sent.

One more thing, never, under any circumstances, send money to an individual. Legitimate lenders don’t operate that way.

No Credit Check — No Problem — Is Definitely a Problem

Regardless of the type of loan offered, whether personal, business, home renovation or whatever, any “lender” saying they don’t do credit checks should be viewed with suspicion. These people have no intention of underwriting a loan, so they couldn’t care less about your credit history.

While we’re on the subject, any credit card offer promising a pre-approved limit and a low interest rate in exchange for a fee is a scam. What’s more, the “issuer” will usually ask for bank account information and authorization of an electronic funds transfer. The moment you provide this information will precede the moment your bank account is drained of the entirety of its contents.

Resolve Your Credit Problems First

Before you look for an easy way out — because there really aren’t any — do what needs to be done to resolve your credit problems. That way, you won’t feel compelled to take a risk on whatever fly-by-night operation you encounter.

With that said, it’s important to do your due diligence to ensure you work with a legit debt relief company like Freedom Debt Relief, too. The Federal Trade Commission offers some guidelines on spotting advance fee loan scams, as well as finding a solid debt relief company with which to work. Reviewing those materials and following the advice above will help ensure you don’t make a troubling situation worse.

Always look behind the curtain to avoid advance-fee scams.


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About Kristin

Master reviewer of all types of products. Love XL Fountain Sodas!! Cheer Mom extraordinaire. Socialite to all things small town and founder of Come socialize and connect with me.

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