Loan scams are common in Canadian communities big and small, putting a large population at risk each year of having their hard-earned money taken.
In fact, the Better Business Bureau of Canada acknowledges that people across the country have lost millions of dollars through financial scams over the past two years.
The scariest part?
Sudbury residents who have lost money to scammers will likely never recover their losses. This is a high price to pay for a simple mistake.
Canadians depend on loans
Having the ability to access lenders can be life-changing. For many Canadians, loan approval can mean the difference between paying the bills and buy groceries – or not.
Cue private online loan vendors.
Private online vendors have helped shift the financial landscape for many. Often, these web-based resources are more inclined to assist people who are experiencing financial issues or those who have been denied a loan from mainstream branches.
However, the increase in online loan vendors has also propelled the number of personal loans fraud cases. Recognizing the common signs of a loan scam can be the easiest and best defence against shady lenders.
“Loan scammers are impersonating many online lenders and similar websites, misleading Canadians into paying to qualify for fraudulent loans."
How can you detect a loan scam?
You’re asked to pay upfront
A recent Loans Canada survey revealed that over 40 per cent of credit-constrained Canadians who believe to be financially knowledgeable agree that online lenders are allowed to ask for upfront payment because it adds additional security.
This could be a costly mistake.
A licensed lender will never demand money upfront. Often illegitimate lenders will ask for a processing or insurance fee as a condition for approval. Don’t fall for this. Being asked to send or transfer money as a method to secure a loan is a red flag.
Watch out for guaranteed approvals
Nothing in life is guaranteed, and that includes loan approvals. A legitimate lender will always first review applicant information and evaluate creditworthiness before approving anything. Guaranteed approval is a method of coaxing applicants in a scam to collect upfront fees.
Learn why guaranteed approval is a scam here.
The lender is being pushy
To get loan applicants to commit quickly, scammers will often put pressure on. This leaves little time for people to realize they’re being swindled. Be suspicious of any tight expiration dates as they can be a sign of a scam.
Where are they located?
Loans Canada’s survey also highlighted that credit-constrained Canadians rarely call vendors to ask questions and do additional research when taking out a loan.
If a vendor does not exist in the real world, it likely means something is awry. Look for independent information on the lender and verify they have an actual office with a legitimate address.
Being knowledgeable is the best line of defence
Loans Canada recommends loan seekers research lenders, search for verified sources for reviews and even discuss applying for loans with trusted friends or family members. These are all methods that Canadians can arm themselves with more information to help them avoid falling for a loan scam.
“Over the last few years we have witnessed a sharp increase in loan fraud,” says Loans Canada Chief Technology Officer, Cris Ravazzano. “Loan scammers are impersonating many online lenders and similar websites, misleading Canadians into paying to qualify for fraudulent loans. We want to raise awareness to help educate and protect potential victims of this fraud.”
I think I’ve been scammed. Now what?
If you’re among the thousands of Canadians who are scammed each year, unfortunately, there isn’t much you can do after the fact. However, if you’re suspicious of a lender who might be trying to defraud you, contact your local police and the Canadian Anti-Fraud Centre.