Loan scams are common in Canadian communities, putting a large population at risk each year of having their hard-earned money taken.
In fact, the Better Business Bureau of Canada reports that people across the country have lost millions of dollars to all types of financial scams over the past two years.
The scary part?
If you’ve been a victim of fraud, the chances of recouping your money are low to impossible. This is a high price to pay for a simple mistake.
Canadians find support in loans
Having access to lenders can be life-altering. For some, loan approval can help pay off bills and put food on the table – or not.
Private online vendors have helped to alleviate financial stress for many. Often, these web-based resources are more willing to work with people experiencing financial challenges or those with unsuccessful loan applications from mainstream branches access the funds they need.
However, the surge in online loan vendors has also seen the number of personal loan fraud cases increase. Understanding the signs of a loan scam can be the easiest and best defence against shady lenders.
How to identify a loan scam?
Payment upfront demanded by the lender
A recent Loans Canada survey discovered that nearly 45 per cent of credit-constrained Canadians who consider themselves financially savvy agree that alternative or online lenders are allowed to ask for upfront payment as an additional security measure.
This misunderstanding can be costly.
A licensed lender will never and should never demand money upfront. It’s illegitimate lenders who will often request a processing or insurance fee as a condition for approval. Don’t fall for this. When a lender asks for money to be transferred via e-transfer, credit card, western union transfers as a method to secure a loan, assume fraud.
Promise to provide guaranteed approval
Guaranteed approvals aren’t promised by legitimate lenders. A legitimate lender will verify the applicant’s information and then evaluate credit history before sealing the deal. Guaranteed approval is a way of luring misinformed applicants to collect upfront fees.
Guaranteed approval is a scam. Find out why here.
Loan scammers will put tremendous amounts of pressure on loan applicants so they will commit quickly, leaving little time for people to realize they’re being swindled. Be aware and cautious of tight expiration dates as they are typically a sign of a scam.
Where are they located?
Loans Canada’s survey also reveals that credit-constrained Canadians rarely investigate and contact vendors to ask questions and do further research on loans.
If the lender has a lack of presence in the real world, assume something is awry. Look for independent information on the lender and make sure they have an actual office with a legitimate address.
Building knowledge as a way to protect from fraud
The best way to prevent fraud, recommends Loans Canada, is by researching lenders, looking for verified sources for reviews and even discussing applying for loans with trusted friends or family members. These are all effective ways that Canadians can arm themselves with more data, which will ultimately help them avoid falling victim to a loan scam.
“Loan fraud has seen an increase over the last few years,” says Loans Canada Chief Technology Officer, Cris Ravazzano. “Loan scam artists are impersonating many online lenders and similar websites, luring Canadians into paying to qualify for fraudulent loans. By raising awareness, we can help inform and protect potential victims of this fraud.”
I believe I’ve been scammed. Now, what do I do?
Unfortunately, there is little that victims of fraud can do after the fact. But prevention is key, and reporting suspicious activity can help others from being swindled. If you have suspicions that a lender might be trying to defraud you or someone else, contact your local police and the Canadian Anti-Fraud Centre.