A loan scam is a pretentious loan offer designed to trick individuals and even organisations into giving out money or personal information to scammers.
The scam involves a fake lender posing as a bank, credit institution, loan broker, private lender, investor, etc. Loan scammers lure victims with the false promise of a quick, low-cost loan with borrower-friendly terms.
In most cases, the scammer intends to extort money from unsuspecting victims. However, some loan scams are elaborate phishing schemes targeting personally identifiable information such as full names, contact details, employment records, banking information, and passport numbers. This highly sensitive information is then used for various identity theft crimes with far-reaching effects.
Loan scams come in all shapes and sizes. They mostly begin with a targeted email, text message, social media post, online ad, or phone call. Once contact is made, the scammer may draw the victim to a bogus website or online form where money or information can easily be exchanged. Some scammers will even convince their victims to transfer money to a personal bank account or digital wallet.
Who’s at risk of loan scams?
Anyone can fall victim to a loan scam.
Loan scams are often highly targeted, which is one of the reasons they’re so effective. Scammers can single out and engage people looking for loans or other financial products. They do this through targeted ads on social media, intercepting email communications, and collecting data from fake and legitimate loan comparison websites.
First-time home buyers shopping around for mortgage deals online are at higher risk of targeted loan scams. So are refinancers, investors, and entrepreneurs researching financial products online
How can you identify a loan scam?
Loan scams are becoming increasingly sophisticated and harder to detect. But they all have telltale signs of fraudulent intent.
Watch out for these loan scam red flags:
- Unsolicited loan offers coming from lenders you never applied to or contacted
- Overly promising language guaranteeing loan approval without a proper evaluation such as credit score, financial strength, or personal background checks
- Asking you to make an upfront payment via peer-to-peer exchange platforms (PayPal, Cash App, Venmo, crypto exchanges, etc.) or fungible tokens such as gift cards supposedly to cover processing, insurance, tax, or collateral fees
- Asking you to deposit ‘refundable’ funds to their bank account as a show of good faith
- Persistent emails, phone calls, or texts, with a sense of urgency and even more promises pressuring you to act promptly
- Vague or incomplete contact information often lacking a physical address
- Emails sent from personal email clients such as Gmail and Yahoo and phone calls made from personal mobile numbers
- Asking for personal documents, such as passports, driver’s licences, bank statements, and credit cards, to be sent as scanned attachments via email
- Inconsistent loan offers, claims, and promises
- Emails and text messages riddled with grammatical, spelling, and punctuation errors
- Mysterious buttons, links, or attachments embedded in emails.
Avoiding loan scams
Legitimate lenders will not contact you randomly via text, email, or social media, persuading you to take their loan offers.
All lenders operating in Australia are required to have a valid Australian Financial Services (AFS) licence and must be registered with the ASIC. So, check whether the ‘lender’ is licensed and listed.
Always go to a legitimate lender’s site when applying for loans online. It should be a properly branded, labelled, and secure website with contact options and a legitimate domain.
Most lenders will want to see and verify your identification documents when processing your loan. This is normally done through secure and transparent third-party services.
What to do if you think you’ve been scammed
If someone contacts you claiming to be a mortgage broker or lender with enticing loan offers check the contact’s legitimacy and credibility.
Are they who they say they are, do they have a licence, and are they registered with the ASIC?
More importantly, why would they contact you at this particular time—did you apply for a loan with the lender or express interest in their products?
If none of these check out, cease communication immediately. Then, gather as much evidence about the incident as possible (email copies, screenshots, phone numbers, phone recordings, website, etc) and report the scam to the ACCC’s National Anti-Scam Centre through Scamwatch.
Filing an official report helps create awareness about the scam. That way, more people can learn to identify and avoid unscrupulous scammers.
And, as always, contact your bank as soon as possible if you’re worried you’ve been the victim of a scam.