Loan scams are common in many Canadian communities big and small, putting many citizens at risk each year of having their hard-earned money taken.
In fact, the Better Business Bureau of Canada confirms that individuals across the country have lost millions of dollars to all types of fraudulent scams over the past two years.
What’s even more frightening?
Recovering stolen money that’s been lost as a result of a scam is rare. This is a significant price to pay for a simple mistake.
Canadians rely on borrowed money
To have access to lenders can be life-changing. For many Humboldt residents, loan approval can mean the difference between paying the utility bill and putting food on the table - or not.
Cue private web-based loan vendors.
Private digital vendors have changed the financial landscape for many. Often, these web-based resources are more likely to assist people experiencing financial issues or those with denied loan applications from mainstream branches gain access to the funds they need.
However, the increase in online loan vendors has also caused the number of personal loan fraud cases to spike. Spotting the common signs of a loan scam can be the easiest and best defence against crooked lenders.
Can you spot a loan scam?
Upfront payment raises flags
A recent Loans Canada survey found that nearly 45 per cent of credit-constrained Canadians who consider themselves financially sharp believe that alternative or online lenders are within their rights to ask for upfront payment because it adds additional security.
This could be a costly misconception.
A licensed lender will never demand money upfront. Before approving a loan, illegitimate lenders will often request a processing or insurance fee. Don’t buy into this. When asked to transfer money via e-transfer, credit card, or Western Union as a method to secure a loan, be wary.
Nothing is guaranteed
Loan approvals, like many things, are never guaranteed. A legitimate lender will always first verify applicant information, followed by a credit check. Guaranteed approval is a technique used to lure applicants to collectupfront fees.
Read more on why guaranteed approval is a scam here.
Pressuring unknowing applicants
Loan scammers will almost always put pressure on loan applicants to commit quickly, so they don’t realize they’re being scammed. Be careful of any tight expiration dates as they can be indicative of a scam.
Does the company even exist?
Another shocking find from Loans Canada’s survey reveals that credit-constrained Canadians rarely call vendors to ask questions and do further research when applying for a loan.
Lack of presence in the real world is a sign that something might be off. Search for independent information on the lender and check they have an actual office with a legitimate address.
Being prepared is the best line of defence
Loans Canada suggests researching lenders, searching for verified sources for reviews and even discussing applying for loans with trusted friends or family members. These are all methods that Canadians can use to help them avoid falling for a loan scam.
“Over the last few years we have seen a rise in loan fraud,” says Loans Canada Chief Technology Officer, Cris Ravazzano. “Loan scammers are impersonating many online lenders and similar websites, coaxing Canadians into paying to qualify for fraudulent loans. We want to shine a light on the issue to help inform and protect potential victims of this fraud.”
I believe I’ve been scammed. What do I do?
Thousands of people scammed each year. If you’re amongst them, unfortunately, there isn’t much you can do after the fact. However, if you suspect that a lender might be trying to defraud you, contact your local police and the Canadian Anti-Fraud Centre.