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Educational Consumer Tips

Advance Fee Loans

Author: Better Business Bureau
Category: Finance

Rule number one: Legitimate lenders never "guarantee" or say that you are likely to get a loan or a credit card before you apply, especially if you have bad credit, no credit, or a bankruptcy.

According to the FTC (Federal Trade Commission) there are six sure signs of an advanced fee loan. Your BBB asks you to consider the following 6 signs as a red flag that you may be involved in an advance fee loan scheme: 

1.A lender who isn’t interested in your credit history. Ads that say “Bad credit? No Credit? No problem!” or “No hassle — guaranteed” often indicate a scam. 

2.Fees that aren't disclosed clearly or prominently. Any up-front fee that the lender wants to collect before granting the loan is a cue to walk away, especially if you’re told it’s for “insurance,” “processing,” or just “paperwork.”

3.A loan that is offered by phone. It is illegal for companies doing business by phone in the U.S. to promise you a loan or credit card and ask you to pay for it before they deliver.

4.A lender who uses a copy-cat or wanna-be name. Always get a company’s phone number from a third party like BBB and call to check that they are who contacted you. Get a physical address, too: a company that advertises a PO Box, virtual office, or UPS store as its address is one to check out with the appropriate authorities.

5.A lender who is not registered or licensed in your state. To check registration and licensing, call your state’s Department of Banking or Financial Institutions. Checking registration does not guarantee that you will be happy with a lender, but it helps to check legitimacy. 

6.A lender who asks you to wire money or pay an individual. Legitimate lenders don’t ask anyone to do that. In addition, don’t use a wire transfer service or send money orders for a loan. You have no recourse if there’s a problem with a wire transaction.

If you suspect these red flags are occurring, you may file a complaint at, with your local Attorney General’s Office, or you state's Department of Financials. Finally, just because you’ve received a slick promotion, don’t assume it’s a good deal — or even legitimate. They work hard to make you think they're legitimate, so it’s really important to do your homework.