Most people stumble upon the scam online or learn about the bogus loan offer from ads in local publications and online through classified sites like Craigslist. Often, an advance fee loan scam website will be created and taken down within a couple weeks only to be replaced by another operating under a different name and fake business address.
The websites look professional and might even put the victim through the rigors of filling out loan application forms—often requiring the victim’s bank account and Social Security numbers. Eventually victims are told they are approved for the loan and just need to pay as much as thousands of dollars upfront via money order or wire transfer to pay for insurance or collateral. Those that pay, never get the promised loan and are even sometimes tricked into giving the scammers even more money.
BBB advises cash-strapped individuals and small business owners to recognize the red flags of an advance fee loan scam:
- The lender has a bad reputation—or none at all. Research the lender thoroughly online and with your BBB. Most trustworthy lenders have an established track record; be wary if you can’t find much information about the lender online.
- The lender is not registered in your state to do business. Check with your state financial or banking regulators.
- The lender asks you to wire money or send a money order—such as for insurance or collateral—before you can receive the loan. You might be told to wire money to another country, consider this yet another red flag.