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Millions are being lost to fraudulent lenders. How can Canadians spot the loan scam?

Knowing the typical signs of a loan scam can be the easiest and best defence against shady lenders.
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Canadian communities big and small are being affected by loan scams, putting a large population at risk each year of having their hard-earned money taken. This includes the people of Thunder Bay. 

In fact, the Better Business Bureau of Canada confirms that individuals from across the country have lost millions of dollars due to a variety of financial scams over the past two years. 

To make matters worse, recuperating stolen money as a result of a loan scam is rare. This is a high price to pay for a simple mistake. 

Canadians rely on loans as a means of support

Gaining access to lenders can be life-changing. For some, loan approval can mean the difference between paying the utility bill and putting food on the table, or not. 

Cue private online loan vendors.

Web-based vendors have improved the financial landscape for many. Often, these private online resources are more willing to help people experiencing financial issues or those with denied loan applications from mainstream branches access the funds they need. 

Sadly, the increase in online loan vendors has also pushed the number of personal loans fraud cases up. Awareness around the common signs of a loan scam can be the easiest and best defence against shady lenders. 

“Scammers are pretending to be online lenders and mimicking similar websites, tricking Canadians to hand over their money for fraudulent loans."

How to detect a loan scam?

You’re asked to make an upfront payment

A recent Loans Canada survey determined that over 40 per cent of credit-constrained Canadians who consider themselves financially aware agree that online lenders can ask for upfront payment when securing a loan because it adds extra security. 

This could be a costly mistake. 

Asking for money upfront would not happen with a licensed lender. Often illegitimate lenders will convince unsuspecting loan applicants to pay a processing or insurance fee as a condition for approval. Don’t fall for this. It is not normal to be asked to transfer money via e-transfer, credit card, or western union transfers as a method to secure a loan.

The lender guarantees approval 

Guaranteed loan approvals are not standard industry practice. A legitimate lender will want to first verify applicant information and evaluate creditworthiness before sealing the deal. Guaranteed approval is just another tactic used to lure in applicants and collect upfront fees. 

Find out why guaranteed approvals are a scam here

Putting Pressure on loan applicants

A loan scammer will likely put pressure on loan applicants to commit quickly so applicants don’t have time to realize they’re being swindled. Be careful - tight expiration dates also are a sign something is awry. 

Where is the lender located?

Loans Canada’s survey also showed that credit-constrained Canadians rarely call vendors to ask questions and conduct more research when taking out a loan. 

Lack of presence in the real world is a sign that something might be wrong. Look for independent information on the lender and check to see if they have an actual office with a legitimate address. 

Arm Yourself with Knowledge

Loans Canada suggests researching lenders, looking for verified sources for reviews and even discussing loan applications with trusted friends or family members. These are all ways that Canadians can arm themselves with more information which will ultimately prevent them from falling for a loan scam.

“Loan fraud has continued to rise over the last few years,” says Loans Canada Chief Technology Officer, Cris Ravazzano. “Scammers are pretending to be online lenders and mimicking similar websites, tricking Canadians to hand over their money 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?

Unfortunately, once you’ve been swindled, it’s hard to recoup the money lost after the fact. However, if you suspect a lender could be trying to defraud you, contact your local police and the Canadian Anti-Fraud Centre