When borrowing money, consumers have to be very careful what type of loan they pursue. While there are many legitimate lenders and loan products in the market, some companies are nothing more than scams that try to take advantage of borrowers. Before signing up for a loan, you need to watch out to make sure that you’re not being taken advantage of.
When signing up for a new loan, your lender may try to get you to pay upfront fees. This is typically an indicator that you are working with a scam lender. In many cases, the lender will take the money that you pay upfront and then not provide you with a loan. Some companies try to get access to these upfront fees and then take off with your money. If you’re thinking about getting a loan, make sure that you don’t sign up for one that asks for upfront fees.
False Credit Report Information
When applying for a loan, another common scam that lenders use is to lie about your credit report. For example, the lender may get a copy of your credit report and tell you that your credit score is much worse than it actually is. Because of this, the lender may try to get you to pay more in interest or fees. If you don’t take the initiative to look up your own credit score before you apply for a loan, the lender could potentially try to overcharge you. Be sure that you know your credit score before getting involved in this type of lending arrangement.
Questionable Loan Terms
When trying to figure out how to get financing, you may also come across lenders that try to get you to agree to questionable loan terms. For example, the lender may try to get you to agree to a balloon loan or a loan with an adjustable-rate. If you sign up for a loan and has an adjustable interest rate, you may get a loan that doubles or triples its loan payment during its term. In many cases, you may not be able to afford these payments after the interest rate increases substantially.
While adjustable rates and balloon loans are not necessarily scams in themselves, lenders can turn them into scams by not disclosing how they work. Many unsuspecting customers have signed up for these types of loans thinking that they were getting a loan with a fixed interest rate. Then after a year or two, they get a bill in the mail from their lender showing that their payment has jumped up significantly without warning. In some cases, lenders have introductory interest rates on loans that are very low in order to entice you to sign up for a loan. Once these introductory rates expire, the other larger interest rates kick in.
Before agreeing to any type of loan, including a mortgage loan, you have to make sure that you get the terms in writing and that you understand them. Some borrowers simply listen to what their lender tells them and do not take the time to do any research on their own. If you do not invest the necessary time to understand your loan, you may end up with terms that you do not like.
In some extreme cases, lending operations are set up so that they can steal personal information from potential applicants. These operations may set up a fake website and act as if they are lenders. Then when a potential customer enters his personal information, the website owner steals this information and uses it to commit identity theft. Once the criminal has your Social Security number and other personal information, you can use it to open new credit accounts, access your existing accounts and engage in other activities. Before you give any company or website your personal information, you have to make sure that you are dealing with a reputable lender and that your information is secure.