Avoid These Common Personal Loan Scams

By Caroline Banton · September 29, 2023 · 9 minute read

We’re here to help! First and foremost, SoFi Learn strives to be a beneficial resource to you as you navigate your financial journey. Read more We develop content that covers a variety of financial topics. Sometimes, that content may include information about products, features, or services that SoFi does not provide. We aim to break down complicated concepts, loop you in on the latest trends, and keep you up-to-date on the stuff you can use to help get your money right. Read less

Avoid These Common Personal Loan Scams

Personal loans can provide much-needed financial assistance, but it’s important to be aware of potential scams that lead to financial loss and identity theft.

Unscrupulous lenders can hook you in by offering a loan with seemingly good terms when, in fact, you could be charged exorbitantly high interest rates and hidden fees. Scam artists, on the other hand, might take upfront fees and/or your personal information and then disappear without ever giving you a loan.

You can protect yourself, however, by understanding common personal loan scams and knowing how to identify legitimate lenders. Here’s what you need to know.

What Are Examples of Personal Loan Scams?

There are a few types of personal loan frauds that crop up with some regularity. These include debt consolidation scams, no-credit-check-loan scams, and loan fees scams. Here’s a closer look.

Debt Consolidation Scams

Debt consolidation is a legitimate way to pay off debt. It entails taking out a new loan (ideally with better rates or terms) and using it to pay off other existing loans or credit cards. There are many legitimate debt consolidation companies that can help individuals pay down their debt. And then there are scammers.

Scammers may offer debt consolidation loans that promise to lower your monthly payments and interest rates. However, they often charge high upfront fees and fail to provide the promised services, leaving you in a worse financial situation.

No-Credit-Check Loan Scams

No-credit-check loan scams target borrowers with a poor or limited credit history. There are legitimate lenders that consider factors other than your credit score, but they are likely to do at least a soft pull on your credit score (which will not affect it).

Scammers, on the other hand, often promise funds without any kind of credit check. They may ask for fees and personal information upfront and then disappear. Or, they might provide a loan but charge exorbitant interest rates.

Loan Fee Scams

Scammers may request upfront fees for processing or guaranteeing a loan. Generally, you should never pay anything upfront — it’s highly likely that your money will disappear, and you will not receive a loan. Legitimate lenders typically deduct any fees from the loan amount.

How Do I Know if I’m Being Scammed for a Loan?

Identifying loan scams requires vigilance and attention to detail. Here are 12 warning signs to look out for.

1. Phone Offers

If you receive a phone call offering you a guaranteed personal loan or unusually low interest rate, it’s most likely a scam. Reputable lenders do not cold-call potential customers. It is illegal, in fact, to make loan offers over the phone. You ‘ll want to look for lenders that advertise through traditional online and mass media.

2. Upfront Fees

While some upfront fees are charged by legitimate lenders, such as origination fees, these fees are usually deducted from the loan amount before the borrower receives the funds and only after the loan is approved. Be wary of any lender that asks for payments before providing the loan funds.

3. Wire Transfers

Scammers will often request loan payments via wire transfer. Legitimate lenders, on the other hand, typically accept payments through recognized and secure channels, such as automatic debit, online payments, or mailing a check to the lender. If you wire funds, there is no way to recover them.

4. Credit History

Be wary of lenders who claim to offer loans without checking your credit history. Trustworthy lenders typically base their loan terms on your ability to repay the loan. This involves looking at your credit, sometimes getting reports from all three major consumer credit bureaus (Equifax, TransUnion and Experian).

5. Copycat Name

Online loan scammers may use a business name or website that seems genuine. They may copy a well-known logo and website to trick you. Be sure to verify the lender’s identity by conducting thorough research online, including a lender search by name with both the Better Business Bureau (BBB) and the Consumer Finance Protection Bureau (CFPB).

6. Personal Information

Scammers will often try to get your bank account details, passwords, Social Security number, and other personal information in order to drain your checking account and/or run up charges on your credit card.

If they have enough of your personal information, they may even be able to take out loans or obtain credit cards in your name. Always check if a lender is legitimate before giving them any of your personal information.

Recommended: How to Report Identity Theft

7. State Registration

A lender or loan broker must register in the states where they do business. One way to vet a lender is to go to their website and make sure it lists the states where the company can legally conduct business. If you don’t see a list of registered states, it’s a sign the company is fraudulent.

If they do list states, it’s a good idea to verify the information with your state regulator or attorney general.

8. Reviews

It can be helpful to research the lender online and read reviews from previous customers. Genuine lenders will have positive reviews and a good reputation. You can also check the BBB’s website to see if there are complaints connected with its business profile. The BBB also has a Scam Tracker that is worth checking as well.

9. Customer Service

Reputable lenders that offer personal loans generally have phone numbers you can call and speak with a live person, rather than a chatbot. It’s a good idea to call the lender’s customer service number, ask questions, and gauge their responsiveness and professionalism. Legitimate lenders prioritize customer service.

10. Hidden Fees

Some legitimate lenders do not disclose their fees on their website; however, they are required to be transparent about fees and terms when they give you a loan offer. Be sure to carefully review loan documents for hidden fees or terms that differ from what was initially discussed.

11. Prepaid Credit Card

Scammers often request payment via prepaid credit cards. Legitimate lenders typically accept payments through secure methods, such as bank transfers or online payment platforms.

12. No Physical Address

Trustworthy lenders have physical office addresses. Be cautious if the lender only provides a PO Box or has no physical presence. If they provide an address, it’s a good idea to look it up on Google Maps or other mapping software. If their address is suspect, their services most likely will be too.

What to Do if You Are Scammed

If you believe you have fallen victim to a personal loan scam, you’ll want to take the following steps.

1. Gather Documents

Compile all relevant documents, including loan agreements, payment receipts, and communication with the scammer.

2. Contact Authorities

It’s a good idea to contact your local law enforcement — by filling out a police report, you’ll have an official record.

It’s also wise to contact agencies specializing in oversight, including your state attorney general’s office, the Federal Bureau of Investigation (FBI), the Federal Trade Commission (FTC), and the BBB. When they have your information, these agencies can better serve and protect other consumers.

3. Contact Your Bank and Creditors

You’ll want to notify your bank and credit card company about the scam. They can advise you on necessary steps to protect your accounts and finances.

4. Set Up Fraud Alerts

You may want to contact one of the three credit bureaus, Experian, TransUnion, and Equifax, and ask them to place a fraud alert on your credit report. This notifies lenders that you’ve been a victim of fraud so they can take extra measures to verify your identity when they get an application for credit in your name. You only need to contact one bureau — that bureau will contact the other two automatically.

Signs of a Legitimate Loan Company

You can be assured that a company is a legitimate lender by doing your due diligence. Here are key things to look for.

Valid Contact Information

Legitimate lenders have valid contact information, including a physical address and a working phone number.


You’ll want to make sure the lender is registered and authorized to operate in your state. You can check with your state’s regulator or attorney general.

Better Business Bureau

It’s wise to verify the lender’s rating and accreditation with the BBB. A good rating and positive customer reviews indicate legitimacy.

Good Reviews

Be sure to read reviews from previous customers to get a sense of their experiences. Legitimate lenders will have positive reviews and a good reputation.

Get a Legitimate Personal Loan

To secure a legitimate personal loan, follow these guidelines:

•  Research potential lenders thoroughly.

•  Compare loan offers and interest rates from multiple reputable lenders.

•  Read loan agreements carefully, ensuring you understand all terms and fees.

•  Ask questions and seek clarification before signing any contracts.

•  Protect your personal information and be cautious about sharing it with a lender you’re unsure about.

The Takeaway

Unfortunately, there are a lot of loan scammers out there. The good news is that you can protect yourself by familiarizing yourself with common scam playbooks and knowing how to identify legitimate lenders.

Remember to thoroughly research lenders, review loan terms carefully, and never provide personal or financial information without verifying the lender’s legitimacy.

If you’re interested in exploring your personal loan options but not sure where to turn, SoFi could help. SoFi personal loans offer competitive, fixed rates and a variety of terms. Checking your rate won’t affect your credit score, and it takes just one minute.

See if a personal loan from SoFi is right for you.


What are some examples of personal loan scams?

There are several examples of personal loan scams to be aware of:

•  Advance fee scams Scammers ask for upfront fees before providing the loan but disappear once they receive your payment.

•  Guaranteed approval scams Fraudsters claim to offer guaranteed loans, regardless of credit history, but ask for upfront fees or personal information.

•  Identity theft scams Scammers pose as legitimate lenders and use the personal information you give them during the loan application process for identity theft.

•  Phishing scams Scammers send fraudulent emails or text messages pretending to be from a reputable lender, requesting personal and financial information.

How do I know if I’m being scammed for a loan?

Some signs that you may be being scammed for a loan include:

•  Upfront fees Legitimate lenders deduct fees from the loan amount, so be cautious if a lender asks for payment before providing the loan funds.

•  Unsolicited offers Unsolicited phone calls or emails offering guaranteed loans or unusually low-interest rates are red flags. Reputable lenders do not make unsolicited offers.

•  Unsecure payment methods Scammers often request loan payments via wire transfer or prepaid debit cards. Legitimate lenders usually accept payments through recognized and secure channels.

•  No credit check Be cautious of lenders who claim to offer loans without checking credit history. Legitimate lenders typically assess creditworthiness before approving a loan.

•  Lack of state registration Check if the lender is registered to operate in your state. Legitimate lenders comply with state regulations.

•  Negative reviews Research the lender online and read reviews from previous customers. Negative reviews or multiple red flags are signs of potential scams.

What do I do if I get scammed?

As soon as you suspect that you have been scammed, consider taking the following steps.

•  Gather documents: Collect all relevant documents, including loan agreements, payment receipts, and communication with the scammer.

•  Contact law enforcement: Report the scam to your local law enforcement agency and provide them with all the information you have gathered.

•  Contact your bank and creditors: Inform your bank or credit card company about the scam. They can advise you on necessary steps to protect your accounts and finances.

•  Set up fraud alerts: Place a fraud alert on your credit report to prevent further unauthorized activity and protect your identity and credit.

•  Monitor accounts: Regularly monitor your financial accounts and credit reports for any suspicious activity or unauthorized transactions.

Photo credit: iStock/Moyo Studio
SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.


All your finances.
All in one app.

SoFi QR code, Download now, scan this with your phone’s camera

All your finances.
All in one app.

App Store rating

SoFi iOS App, Download on the App Store
SoFi Android App, Get it on Google Play

TLS 1.2 Encrypted
Equal Housing Lender