Loan scams are common in many Canadian communities, putting a large population at risk each year of having their hard-earned money taken in the blink of an eye.
The Better Business Bureau of Canada supports this claim and says that people across the country have lost millions of dollars to all types of financial scams over the past two years.
And it gets worse.
Victims of loan scams rarely ever recover their money. This is a high price to pay for a simple mistake.
Canadians rely on loans
For Prince George residents, accessing a loan can be life-changing. For some, getting loan approval can mean the difference between paying the electricity bill and being able to eat - or not.
This is where private online loan vendors come in.
Private online vendors have enhanced the financial landscape for many. Often, these web-based resources are more open to helping people experiencing financial issues or those whose loan applications have been denied from mainstream branches access the funds they need.
Given the increase in online loan vendors and the number of personal loan fraud cases, recognizing the signs of a loan scam can help protect you from shady lenders.
How to recognize a loan scam?
Lender ask for upfront payment
A recent Loans Canada survey found that close to 45 per cent of credit-constrained Canadians who believe to have financial knowledge agree that alternative or online lenders are allowed to ask for payment upfront because it adds additional security.
This understanding could be costly.
A legitimate lender will never ask for money upfront. Often scammers will request a processing or insurance fee as a condition for approval. Don’t fall for this. Red flags should go up if you’re being asked to transfer money via e-transfer or credit card as a method to secure a loan.
Guaranteed approval promises
Nothing in life is guaranteed, including loan approvals. A legitimate lender will verify applicant information and evaluate creditworthiness before sealing the deal. Guaranteed approval is a method of luring applicants to collect upfront fees.
Find out the reasons why guaranteed approval is a scam here.
Scam artists will often pressure loan applicants to commit quickly without giving them time to reflect. This leaves little time for people to realize they’re being taken for a ride. Be careful as well of any tight expiration dates as they can be a sign of a scam.
Do they even exist?
Loans Canada’s survey also reveals that credit-constrained Canadians rarely call vendors to ask questions and do further research when taking out a loan.
If you can’t find a presence in the real world, it’s likely a sign that something might be awry. Look for independent information on the lender and verify they actually have an office with a legitimate address.
Knowing what to look for is the best line of defence
To protect yourself from scammers, Loans Canada suggests applicants properly research lenders, look for verified sources for reviews and even discuss their application with trusted friends or family members. These are all tools that Canadians can arm themselves with more information, which will ultimately help them avoid falling for a loan scam.
“Over the last few years there has been an increase in loan fraud,” says Loans Canada Chief Technology Officer, Cris Ravazzano. “Loan scam artists are impersonating many online lenders and similar websites, manipulating Canadians into paying to qualify for fraudulent loans. We want to raise awareness around this issue to help inform and protect potential victims of this fraud.”
Have you been scammed? Now what?
If you’re among the thousands of people scammed each year, unfortunately, there isn’t much you can do after the fact. However, if you’re suspicious that a lender might be trying to defraud you, contact your local police and the Canadian Anti-Fraud Centre.