How can I tell if an online lender is legit?
Dear Consumer Ed:
I applied for a $10,000 loan online. I provided my Social Security Number and bank account information for the credit check. The company wants me to pay $1,200 up front (via wire transfer) to secure the loan. They have a really good explanation for why they need the money up front, and I really want to send it, but I am afraid it might be a scam. How can I tell if a lender is trustworthy or not?
Consumer Ed says:
You are right to be concerned about this company and its request. Legitimate loan companies do not generally charge an upfront fee for a loan. Instead, they simply deduct any loan fees from the amount borrowed once the loan has been approved. Another red flag is presented when a company asks you to pay via wire transfer. Scammers love wire transfers because they are hard to trace and it's practically impossible to get your money back once you have wired cash.
You should make sure the company has a legitimate street address and phone number. Avoid companies who use a post office box as their corporate address or who can only be reached by leaving a message on an answering machine or with a call-center operator. Companies who guarantee loans to anyone, regardless of their credit history, are typically scammers.
A good way to find a reputable loan company is to ask trusted friends or family members for a recommendation. You should also check the reputation of a company through the Better Business Bureau. In addition, you can check with the city or county in which the company is located to verify that it has a valid business license.
Don't provide your Social Security Number or financial account information to a company unless you first have determined that the business is reputable. If you believe you have provided such information to a scammer, you should inform your bank or credit card company and request that they close down your account and set up a new one. In addition, you should consider putting a security freeze on your credit reports so that the scammer cannot open up a new account in your name. To do so, contact each of the three credit bureaus:
Experian: 1-888- 397-3742