All Canadian communities, big and small, are susceptible to loan scams, which are putting many people at risk of losing their hard-earned money.
The Better Business Bureau of Canada reports that people across Canada have lost millions of dollars to all types of financial scams over the past two years.
Can it get worse?
Sadly, recovering lost money from a scam is rare - a simple mistake with a high price to pay.
Canadians rely on loans
Accessing a loan can be life-changing. For many, an approved loan can mean the difference between paying the electricity bill and putting food on the table - or not.
This is where online loan vendors come in.
Private online vendors have allowed people to improve their financial landscape. More often than not, these web-based resources are more likely to help people experiencing financial issues or those with denied loan applications from mainstream branches access the money they need.
But beware. The number of online loan vendors has resulted in an increased number of personal loan fraud cases. To avoid being the victim of a loan scam, recognize the common signs of shady lenders.
How to spot a loan scam?
Asked to pay upfront? Watch out.
According to a recent Loans Canada survey, nearly 45 per cent of credit-constrained Canadians who consider themselves financially savvy believe that alternative or online lenders are permitted to ask for upfront payment because it adds additional security.
This could be a costly mistake.
To be clear, licensed lenders will never ask for money upfront. Often fraudulent lenders will request a processing or insurance fee as a condition for approval. Don’t buy into this. Lenders asking for upfront money via e-transfer, credit card, or Western Union transfers as a method to secure a loan is a red flag.
Promise of a guaranteed approval
Loan approvals are never guaranteed, like many other things in life. A legitimate lender will first verify applicant information, followed by evaluating creditworthiness before finalizing the deal. Guaranteed approval is a method of luring applicants to collect upfront fees.
Guaranteed approval is a scam - Find out why here.
Using pressure tactics
To get loan applicants to commit quickly, scammers will often put pressure on. This is effective because it leaves little time for people to realize they’re being swindled. Be cautious of any tight expiration dates as they can signal a scam.
Are they a real company?
The Loans Canada survey also showed that credit-constrained Canadians rarely call vendors to ask questions and do further research when taking out a loan.
If the loan company has a lack of presence in the real world, something might be fishy. Research independent information on the lender and verify they have an actual office with a legitimate address.
Knowledge is the best line of defence
Loans Canada recommends doing your due diligence by researching lenders, checking verified sources for reviews and even mention applying for loans to trusted friends or family members. These are all ways that Manitobans can protect themselves, which will ultimately prevent them from falling for a loan scam.
“We have seen an increase in loan fraud over the last few years,” says Loans Canada Chief Technology Officer, Cris Ravazzano. “Loan scammers are pretending to be legitimate online lenders with similar websites, tricking Canadians into paying to qualify for fraudulent loans. We want to shine a light on this issue to help inform and protect potential victims of this fraud.”
I think I’ve been swindled. Now what?
Sadly, if you’re one of the thousands of people scammed each year, there isn’t much you can do after the fact. You can, however, report suspicious behaviour or a suspected fraudulent lender to the local police and the Canadian Anti-Fraud Centre.