8 Signs of a Personal Loan Scam

1. The Lender Guarantees You'll Be Approved

Any time a lender guarantees approval, you should run in the opposite direction.

Trustworthy lenders want to know you'll pay back your loan. They do their due diligence by verifying your personal and financial information, including your identity, credit history, income and more. Any company that claims to not care about your credit history—and therefore, how likely you are to repay the loan—should give you pause.

Tip: Don't confuse a loan prequalification with a guarantee. The former can give you an idea of whether or not you'll be approved for a loan, but it's never a guarantee.

2. The Lender Pressures You to Act Immediately

Scammers often resort to urgency to get you to act without thinking clearly. For example, they may offer a limited-time rate or threaten to revoke your loan offer if you don't act immediately.

If you ever feel pressured to make a quick decision when borrowing money, pause and evaluate the situation. Scam or not, you're better off working with a lender who encourages you to make an informed decision, even if you need more time.

3. The Lender Demands an Upfront Payment

If a lender demands you pay upfront, they're not a lender—they're a fraud. In what's known as an advance-fee loan scam, a scammer promises to lend you money, but only after you pay an upfront fee. Once you pay the fee, the "lender" disappears.

A legitimate lender won't promise you a loan in exchange for upfront payment. However, they may charge application or other upfront personal loan fees. Personal loans can also have origination fees, which are deducted from your loan proceeds.

Tip: Just because a lender charges you an upfront fee doesn't necessarily mean they're a fraud. But if the company does ask for upfront payment, take caution and make sure there aren't any other red flags that point to a scam.

4. The Lender Asks for a Lot of Personal Information

Sometimes, a scammer might be after your personal information instead of (or in addition to) your money. They can then sell it or use the information to commit identity theft or fraud.

Legitimate personal loan lenders need certain information to verify your identity and check your credit history. Usually, this includes your name, address and Social Security number. But beware of a potential lender asking you for excessive or unusual information, such as your mother's maiden name.

5. The Lender Calls or Texts You First

Legitimate lenders may contact you with a letter or email, inviting you to apply for a loan or notifying you of a preapproved offer. However, they generally won't call or text you to do so.

Scammers, on the other hand, might call or send you a text before you've applied for a loan. Some even identify potential fraud victims by buying contact information of people who've previously applied for a loan.

6. The Lender Isn't Registered in Your State

Lenders have to be registered in any state where they do business. Look for these licenses on a lender's website, usually toward the bottom of the page. You can also verify a lender's license by searching the Nationwide Multistate Licensing System & Registry (NMLS) database.

7. The Lender Doesn't Have a Physical Address

Not having a physical location is a red flag for any lender. Even online lenders should have a physical address where employees work. Usually, you can find this information on the lender's website.

If you find an address, check to make sure it matches the address listed on the lender's state license. Sometimes scammers share a fake address, so it's important to confirm the business at the address you find matches the lender's name. If you can't find a physical address at all, consider another lender.

8. The Lender's Website Isn't Secure

A secure website isn't always a guarantee of a legitimate lender, but an unsafe website is definitely a bad sign. If there's no "s"—which stands for "secure"—after "http" in the lender website's URL, or if your browser warns you of an unsafe connection, avoid that company.

Even if it's a legitimate lender, you don't want to risk compromising your personal information by submitting it via an unsecure website.

Learn more: How to Protect Your Personal Information Online

What to Do if You've Been Scammed

Falling for a scam can be expensive, frustrating and even embarrassing. But you're not alone: According to Pew Research data, roughly 1 in 5 Americans reports having lost money to an online scam.

Unfortunately, you can't always get your money back if you've been scammed. But there are some actions you can take to minimize financial damage:

• Reverse the transaction. If you think you paid money to a scammer, see if you can reverse the transaction. This may be possible if you paid by credit card, debit card, bank transfer or wire transfer. Contact your financial institution as quickly as possible to request the reversal.
• Report identity theft. If you gave out your personal information to a scammer, you may be at risk of identity theft. Go to Identitytheft.gov to report the incident and to receive a personalized recovery plan.
• Report the scam. Head to reportfraud.ftc.gov to report the scam to the Federal Trade Commission (FTC). Doing so can help the FTC spot trends and warn consumers of similar scams.
• Put a fraud alert on your credit profile. You have the right to place a fraud alert on your credit file that instructs creditors to verify your identity before approving a credit application. This can help you stop scammers who are trying to use your information to get credit. You also have the right to freeze your credit, which limits access to your credit without your permission.
• Change your login credentials. If you gave a scammer your password, be sure to change it to a new, strong password. And if you use those credentials on any other website, be sure to change them there too.

How to Find Legitimate Personal Loan Lenders

Avoiding personal loan scams can save you time, money and headaches. Here are some tips to help identify legitimate personal loan lenders and spot the scammers before it's too late.

• Start with reputable sources. Start with who you know by asking friends and family members for lender recommendations. You can also search trusted third-party financial publications' reviews—just pay attention to how they come up with their ratings.
• Use a personal loan comparison website. Working with a trusted business can help you find good offers from reputable lenders. For example, Experian's loan comparison platform allows you to view loan options, get preapproved and submit an application in one place.
• Look for transparent pricing. Before choosing a lender, ensure you understand the company's fee structure. If you can't find this information on the website, contact customer service. And if you can't get a clear fee schedule, you might consider another lender.
• Read reviews. Search a lender's name on third-party review websites like Trustpilot or the Better Business Bureau to learn about previous customers' experiences. You can also search the company using the Consumer Financial Protection Bureau's complaint database to find out what issues consumers have had with the lender and whether or not they've been resolved.
• Verify contact information. Make sure the company provides contact information, including an email address, phone number, and physical address. Better yet, reach out to customer service to find out how easy it is to contact someone. Finally, look up the physical address to ensure it's accurate.
• Check a lender's license. When you find a lender you're interested in working with, verify the business is licensed in your state. You can look for this information on the lender's website or by searching the NMLS database.

Learn more: How to Compare Personal Loans

The Bottom Line

Personal loans can be helpful when you need some cash to make ends meet, but beware of scammers who are after your money or personal information. Look out for red flags, like unsafe websites, text or phone solicitation, phony contact information, and guaranteed approvals. And before choosing a lender, double-check their license and fee schedule before handing over your personal details.

If you think your personal data might be at risk, protect yourself with Experian's free online personal privacy scan. It'll highlight places where your data might be exposed and give you next steps for getting your info locked down.