Common Loan Scams & Red Flags To Watch Out For

February 21, 2013

February 20, 2013 Jacksonville, FL- Each week the BBB is inundated with calls about predatory loan schemes. Cash –strapped families responding to online ads in desperation are being scammed out of what little assets they have. These predatory lenders have no regard for state or federal laws, and usually their tactics drive the recipients further into debt. The cost of doing business these lenders is high. You could lose not only your money, but whatever you used to secure the loan. BBB serving Northeast Florida & Southeast Atlantic wants to help consumers avoid these common loan scams and find a reputable lender.

Common Loan Scams:

· Advanced Fee Loans-These lenders say you are approved for a loan, then contact you again demanding a fee before you can get the money. You may have to give your bank account information, wire money to an individual or purchase a prepaid credit card to send to them. All of these are cues to walk away.

· Auto Title Loans-Lenders charge consumers an outrageous annual percentage rate for small cash loans secured by the title to cars owned free and clear. The borrowers are then trapped in perpetual debt through unaffordable payments, high interest costs and the threat of repossession.

· Online Payday Loans-These loans require a bank account number and little else. Therefore, you are at the mercy of the lender and oftentimes more money than was agreed to is withdrawn from the account. High interest rates absorb most of the payments with nothing applied to the principal loan amount. This quickly turns into a debt spiral.

· Loan Modification Scams- Offers to negotiate a deal with your lender or get refinancing on your behalf, but wants you to pay a fee in advance. They may even suggest that you make the mortgage payments directly to them. Once they have received the “fee” and/or a few mortgage payments they disappear with your money and you end up further in debt.

Red Flags To Watch Out For:

· The lender is not forthcoming about their location. Refuses to give physical address.

· The lender does not require any background information other than your bank account number.

Finding a Reputable Lender:

· Shop around for your loan, compare interest rates, loan lengths, monthly payment amounts, etc.

· Be wary of unsolicited loan offers, either by mail, phone call, or e-mail.

· Avoid lenders who promise a loan regardless of your credit status.

· Don’t be swayed by high pressure sales tactics.

· Borrow only the amount you need and understand the terms of the loan. Don’t agree to payments you cannot afford.

· Beware of loans with large balloon payments at the end.

· Walk away from the deal if your questions aren’t answered.

· Don’t sign any documents you haven’t read, don’t understand or that have blank spaces to be filled in later.

· Research the lender with the BBB

Report Abusive Lenders:

If you have been a victim of lending abuse contact the BBB to file a complaint, or the Federal Trade Commission

For further information or to schedule an interview with a BBB spokesperson, contact Tom Stephens, President BBB Serving Northeast Florida & Southeast Atlantic.

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Contact BBB serving Northeast Florida & the Southeast Atlantic at 800-713-6661