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 reports that people across the country have lost millions of dollars to all types of financial scams over the past two years.
The scary part?
Recovering money that’s been handed over as a result of a scam is rare. This is a high price to pay for a simple mistake.
Canadians rely on loans
Having access to lenders can be life-changing. For some, loan approval can mean the difference between paying the electricity bill and putting food on the table - or not.
Cue private online loan vendors.
Private online vendors have improved the financial landscape for many. Often, these web-based resources are more willing to help people experiencing financial issues or those with denied loan applications from mainstream branches access the funds they need.
However, the increase in online loan vendors has also spurred 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, tricking Canadians into paying to qualify for fraudulent loans."
How can you spot a loan scam?
You’re asked to pay upfront
A recent Loans Canada survey found that nearly 45 per cent of credit-constrained Canadians who consider themselves financially savvy agree that alternative or online lenders are allowed to ask for upfront payment because it adds additional security.
This could be a costly misconception.
A licensed lender will never ask for money upfront. Often illegitimate lenders will request a processing or insurance fee as a condition for approval. Don’t fall for this. Being asked to transfer money via e-transfer, credit card, western union transfers as a method to secure a loan is a red flag.
Promise of a guaranteed approval
Nothing in life is guaranteed, including loan approvals. A legitimate lender will verify applicant information and evaluate creditworthiness before sealing the deal. Guaranteed approval is a method of luring in applicants to collect upfront fees.
Find out why guaranteed approval is a scam here.
Putting the pressure on
Scammers will often put pressure on loan applicants to commit quickly. This leaves little time for people to realize they’re being swindled. Be wary of any tight expiration dates as they can be a sign of a scam.
Do they even exist?
Loans Canada’s survey also reveals that credit-constrained Canadians rarely call vendors to ask questions and do further research when taking out a loan.
Lack of presence in the real world is a sign that something might be awry. Look for independent information on the lender and double-check they have an actual office with a legitimate address.
Knowledge is the best line of defence
Loans Canada recommends researching lenders, looking for verified sources for reviews and even discussing applying for loans with trusted friends or family members. These are all ways that Canadians can arm themselves with more information which will ultimately help them avoid falling for a loan scam.
“Over the last few years we have seen an increase in loan fraud,” says Loans Canada Chief Technology Officer, Cris Ravazzano. “Loan scammers are impersonating many online lenders and similar websites, tricking Canadians into paying to qualify for fraudulent loans. We want to bring awareness to this issue to help inform and protect potential victims of this fraud.”
I think I’ve been scammed. Now what?
If you’re among the thousands of people scammed each year, unfortunately, there isn’t much you can do after the fact. However, if you’re suspicious that a lender might be trying to defraud you, contact your local police and the Canadian Anti-Fraud Centre.