Scams by shady lenders are common in Canadian communities big and small, putting a large population at risk each year of having their money stolen.
The Better Business Bureau of Canada confirms that people across the country have unwillingly lost millions of dollars to all types of financial scams over the past two years.
The scary part?
Recovering any lost money handed over as a result of a scam is rare. This is an enormous price to pay for a simple mistake.
Canadians rely on loans
A loan can be life-changing. For some, being approved for a loan can mean the difference between paying the bills and putting food on the table - or not.
Signal private online loan vendors.
Private online vendors have improved the financial landscape for many. Frequently, these web-based resources are the solutions for people suffering from financial challenges or those whose loan application was denied from mainstream branches.
However, the increase in online loan vendors has also caused the number of personal loan fraud cases to jump. Want to protect yourself against shady lenders? Recognizing the common signs of a loan scam can be the easiest and best defence.
How can you sniff out a loan scam?
Payment upfront, not the norm
A recent survey conducted by Loans Canada found that close to 45 per cent of credit-constrained Canadians who consider themselves financially knowledgeable agree that alternative or online lenders are allowed to demand upfront payment because it adds additional security.
This misconception could be costly.
A legitimate lender will never ask a potential client for money upfront. Often fake lenders will request a processing or insurance fee as a condition for approval. Don’t fall for this scam. Being asked to transfer money via e-transfer or credit card as a method to secure a loan is not normal.
Approval guaranteed
Loans are never guaranteed. A legitimate lender will ask for applicant information and evaluate their creditworthiness before approving a loan. Guaranteed approval is a technique used to lure unsuspecting Canadians to collect upfront fees.
Guaranteed approval is a scam. Learn more here.
Putting the pressure on
Loan scammers will often pressure loan applicants to commit quickly. This is done so people have little time to realize they’re being swindled. Be cautious of any tight expiration dates as this could signal 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 if they have an actual office with a legitimate address.
Knowledge is the best line of defence
Loans Canada urges Canadians to research lenders, look for verified sources for reviews and even discuss applying for loans with trusted friends or family members. These are all ways which Canadians can arm themselves with more information to help them avoid falling for a loan scam.
“In the last few years we have noticed an increase in loan fraud,” says Loans Canada Chief Technology Officer, Cris Ravazzano. “Loan scammers are impersonating many online lenders and similar websites, luring Canadians to pay to qualify for fake loans. We want to bring awareness to this issue to help inform and protect potential victims of this fraud.”
You’ve been scammed. What to do?
If you’ve been scammed, unfortunately, there isn’t much you can do once it’s done. But reporting suspicious and potential scammers looking to defraud you to your local police and the Canadian Anti-Fraud Centre is always recommended.
