How To Avoid Online Loan Scams
Malaysians are the biggest suckers for online scams. A survey by telecommunication firm Telenor Group found that one in five Malaysians had been victims of Internet auction and online dating scams, with at least 46% of respondents admitted to being victimised.
He said he came to know about the company through Facebook and submitted an application for a RM50,000 loan, adding that he was attracted to the positive comments on Facebook and low interest rates.
Despite such offers sounding and looking dubious, Malaysians are still falling for them. So here’s what you need to know about online scams:
Know the works
The first step to avoid being scammed is to know how loans work. A personal loan works very much the same as any other type of loan. You borrow a certain amount of money from a bank or lender so that you can pay for the things you need.
An agreement will be drafted by the lender where repayment details, interest rates and other miscellaneous details are spelled out.
This entire process does not require the lender to pay any sum upfront as it is illegal for a lender to ask for pre-payment.
It is also important to find out who the borrower is. Are you applying for a loan from a licensed financial institutions such as a bank, or a money lender or credit company? Loans from licensed financial institutions will be your safest option as they are regulated by the central bank.
Know the scams
Online scams are aplenty. The “advance fee loan” gets the borrower to pay an advance fee at the time of approval. This is the modus operandi for most loan scammers, but consider this – it really doesn’t make sense for you to pay money you don’t have just to get a loan.
Another common tactic used by scammers is phishing. In this case, fraudsters would impersonate a business to trick you into giving out your personal information. There are a few ways this is done. A scammer might impersonate a well-known financial institution or a loan company with a legitimate looking website, or the usual way which is via email.
While it is difficult to keep tabs on the latest scams, unless the victims appear on the news, there are certainly warning signs that borrowers can be aware of:
There are many loans and credit cards to suit a variety of purposes such as starting a business or consolidate your debt. But a lender who does not care about credit history is worrisome. Ads that say “No hassle – fast money guaranteed” or “We don’t care about your credit. This loan is yours” just sound too good to be true.
Legitimate sources will only approve a loan until they have assessed borrowers’ credit history and confirmed the information on the application form is correct.
2. Upfront payment
When a lender demands upfront application fee, tread the water carefully. In most cases, legitimate lenders will not ask the borrowers to pay anything before the borrower receives the loan. Some scammers will call this “processing fee” or even tell the borrower that such upfront payment is required due to bad credit health. These fees, if required, are usually deducted from the loan amount before disbursement.
3. Pressed to act immediately
Schemers will press you to give personal information or send money before getting any paperwork done. They’ll say it is a one-time offer or you have to act now if not you’ll miss interest-free instalments. Always insist on the paperwork and go through the fine prints before applying for anything, especially if it involves money.
4. Requesting personal information
Never give your credit card or bank account information over the telephone or Internet unless you know why such information is being requested and which company is doing the asking.
Know the services
In this Internet era, fraudsters have come out of the woodwork to attack unsuspecting consumers, and one of the common ways they do so is with the online loan scam. However, we can’t let a few rotten apples spoil the barrel.
The Internet has offered us way more benefits and convenience than risks. With financial technology emerging, we can now receive, transfer and exchange money without leaving our home. We can also make more informed financial decisions because we are able to do more research and comparison before we make a decision.
There are websites that provide users with comparisons of financial products such as this website, iMoney. But how do you differentiate online third-party websites from scammers?
The difference is, sites like this only assist in loan application with licensed financial institutions, and not money lenders or credit companies. These websites do not lend money directly to the borrowers, but merely provide additional service to help them apply for the best loans. The service is completely free for the consumers, so you don’t have to pay a single cent to apply for a loan.
What iMoney does is only advisory, where visitors to the portal apply online and expect a follow-up call from the iMoney team who will ask them a set of questions.
A suggestion of the best personal or home loan that fit their needs will be given. Then the bank takes over and no official documentation is taken from the applicants. For a sample of this service, click here. It is that straightforward.
When it comes to applying for a loan from a legitimate source, there is no shortcut. Borrowers and lenders need to fulfil certain criteria before a loan transaction can be approved and carried out. If you want to take a loan, ask yourself why you need one in the first place. If you are an unserved borrower, you might want to get help from a financial adviser to assess your credit health and perhaps use other legitimate means to bring you back in the black.
Just remember you can’t game the system. Borrowing from shadow banks or dubious sources will harm you. If something is too good to be true, it is usually a scam. Falling for it will put you in an even worse situation financially than you were before.