Are Online Personal Loans Safe? How To Avoid Loan Scams
Just a couple of decades ago, getting a personal loan anywhere other than a bank or credit union was nearly impossible. In the digital age, online personal loans have become more common and have many advantages. It is more important than ever to ask yourself, " Are online personal loans safe?” With a few precautions, the answer is yes!
Online personal loans may offer competitive rates, are faster to obtain and have fewer requirements for borrowers, depending on the lender. But is your information secure? Online personal loans can be safe when the lender follows industry-specific security practices, and you take steps to protect your information.
Read on to learn what to look for in an online lender and how to keep yourself safe.
Key Takeaways
Online personal loans can be safe when the lender is legitimate and your data is protected. Look for clear loan terms, strong encryption and no upfront fees before you apply.
Guaranteed approval and upfront fees are the clearest signs of a loan scam. No legitimate lender guarantees approval or asks you to pay before your loan is funded.
Vet any online lender before you share personal or banking information. Confirm licensing, a real physical address and working customer support, and check reviews for complaint patterns.
Act fast if you think you've been scammed to limit the damage. Contact your bank, freeze your credit, file reports with the Federal Trade Commission (FTC) and Consumer Financial Protection Bureau (CFPB) and save all documentation.
Summary generated by AI, verified by MoneyLion editors
What Makes an Online Lender Safe To Use
Although major banks have been vulnerable to malicious attacks in recent years and nothing online is 100% safe, online banks employ some of the best encryption systems available to protect your data.
Here are some things to look for when considering an online lender:
The loan’s amount, annual percentage rate (APR), fees and repayment terms are shown before you accept the loan.
Customer service offers more than one way to contact it, such as phone, email and live chat.
The lender’s privacy policy explains how your personal and banking information may be used.
Security tools, such as multifactor authentication, are available when you create or access an account.
No upfront payment is required before the loan funds are released.
Red Flags That Signal a Loan Scam
Even though a loan offer may seem legit, here are some signs it’s not:
Offers “guaranteed approval” for the loan before you fill out an application or have your credit checked.
Uses pressure tactics to get you to apply for the loan immediately, such as “We can approve your loan and deposit the funds in your account today.”
Requires an upfront fee before loan approval.
Shows no evidence of state or federal licensing in your state.
Lists no physical location or working contact information.
Uses a website domain registered within the past year.
Provides no information on its website regarding how it will protect the personal and financial information you enter during the loan application process.
How To Find a Legitimate Online Lender
Before you apply for a personal loan with any online lender, here’s how to confirm the lender is legitimate.
Search for the lender’s official website instead of clicking a random ad, text link or email offer.
Carefully inspect the website for misspelled words such as the lender’s name or other details.
Search for the lender’s physical address. Even online banks should have a physical address for their headquarters.
Look for licensing information near the bottom of the lender’s website.
Read customer complaints on the Better Business Bureau (BBB) and CFPB Complaint Database and look for patterns such as surprise fees, loans applied for but never received, payment issues or trouble reaching customer support.
Make sure customer service is easy to reach. Confirm there’s a working phone number, email address, chat option or help center before you apply.
4 Steps To Protect Your Personal Information When Applying
Once you’ve decided on a lender, here’s how to safeguard your personal information during the application process.
1. Use Strong and Unique Passwords
Use a new password when you set up your login information with the online lender. The password should be long and unique, and ideally one you don't use anywhere else. Turn on multifactor authentication when it's offered.
2. Keep the Hard Copy of Your Loan Application in a Secure Location
If you print out a copy of your loan application or other documentation, keep it in a secure location, such as a locked filing cabinet at home or work.
If you decide later to throw away or recycle the paper, shred it first so others are less able to obtain your sensitive personal information.
3. Be Cautious of Phishing Scams
Phishing scams are rampant, and scammers are better than ever at appearing like legitimate institutions. Provide personal information only if you have verified the source via email or phone.
If you receive an email from your bank requesting that you take action or log in, navigate directly to the bank’s website or open the bank app. This is a safer option to avoid accidentally clicking a phishing link.
If someone calls you claiming to be from your bank, don't provide personal information such as your Social Security number, passwords or account verification details. If they ask for this information, you can hang up and call the bank directly at the number you have.
4. Regularly Monitor Your Financial Accounts and Credit Reports
When you periodically check financial accounts and credit reports, you can quickly spot and report suspicious charges or new accounts. You can access your financial statements online through your bank’s website or app.
You can check your credit report by visiting AnnualCreditReport.com. You’re entitled to free weekly reports from each of the three main credit bureaus: Experian, Equifax and TransUnion.
In addition, many banks and credit card issuers now offer free credit scores or monitoring that make it easier to spot unusual activity quickly.
Online Lenders vs. Traditional Lenders
The right lender depends on your priorities. Compare online and traditional lenders side by side below.
Factor | Online Lenders | Traditional Lenders |
|---|---|---|
How you apply | Website or mobile app | Bank branch or website |
Time to get funds | Often faster than traditional lenders | Funding often takes more time |
Approval process | Relies heavily on automated technology decisions | May require extra documentation and review |
Best for | Borrowers who are comfortable with signing documents digitally | Borrowers who want an in-person lending experience |
Support options | Phone, email, chat | In-person, phone, email |
What To Do If You've Been Scammed
If you become a victim of online loan scams, you have resources. The first step is to stay calm and then start making phone calls.
1. Contact Your Bank or Financial Institution
Your bank or financial institution can guide you on protecting your accounts and potentially reversing unauthorized transactions. Contact each bank or credit card issuer where you have an account.
You can also contact all three credit bureaus to freeze your credit temporarily and prevent others from opening new accounts in your name.
2. File a Complaint With Law Enforcement
To file a complaint with law enforcement, you will need to provide them with evidence or documentation related to the fraud, including email correspondence, direct messages, website login information or screenshots you took while signing up.
3. Contact the Appropriate Regulatory Authorities
If you are a victim of fraud, you should also contact the relevant regulatory authorities, including the FTC and the CFPB.
They can investigate the scam and take action against the scammer or provide you with support and suggestions for further steps.
4. Place a Fraud Alert on Your Credit File
Even if you have already frozen your credit, you can notify the credit reporting agencies of possible fraud.
This process will help protect you from further fraudulent activity and make it more difficult for scammers to open new accounts in your name.
5. Keep All Related Documentation
All documentation related to the fraud can be used as evidence, including emails, text messages and loan agreements. This evidence can be helpful when working with authorities, your bank or credit reporting agencies.
Bottom Line
Online personal loans can be safe when the lender is legitimate, the loan terms are clear and the application process protects your information.
Before you accept a loan, make sure you can review the loan amount, APR, fees, repayment schedule and full loan agreement.
Guaranteed approval, upfront fees, pressure to apply fast or missing contact information are warning signs of a possible loan scam.
If you think you gave information to a scam lender, contact your bank, freeze your credit, file a report and save any emails, texts, screenshots or loan documents.
Online Lending Safety FAQs
Still wondering how to borrow online without getting burned? Here are answers to the questions people ask most about staying safe with online lenders.
Can I get scammed even on a legitimate-looking website?
Yes, AI tools have made it easier than ever for scammers to create legitimate-looking websites that impersonate those of well-known brands.
Does applying for an online loan hurt my credit?
Yes. Applying for an online loan can hurt your credit because it will temporarily lower your score by less than five points if the lender conducts a hard inquiry to check your credit.
Can I use an online personal loan for any purpose?
Generally, you can use an online personal loan for any purpose. Unless the lender has stipulations in the contract, personal loans, regardless of the loan amount, can be used for anything you need, from an emergency medical expense to a car repair to home renovations.
Are online personal loans more expensive than traditional loans?
No, online personal loans aren’t usually more expensive than traditional ones. In some cases, they could have lower interest rates. However, you may want to shop around for the best rates.
Key Terms
Online personal loan: An unsecured loan applied for and managed entirely online, often with faster funding and fewer requirements than a bank branch loan.
Advance-fee loan scam: A scheme that promises a loan but demands an upfront payment first, then disappears without delivering the funds. Legitimate lenders never require a fee before funding.
Guaranteed approval: Marketing language promising a loan to anyone regardless of credit or income. No legitimate lender offers it, so treat it as a warning sign.
Phishing: A fraud tactic where scammers pose as a trusted institution to trick you into sharing personal or financial details, often through fake emails or links.
Multifactor authentication: A security feature that requires a second verification step, like a texted code, in addition to your password, making accounts harder to breach.
Hard inquiry: A lender's review of your credit when you apply, which can lower your score by usually less than five points and stays on your report for two years.
Credit freeze: A free tool that restricts access to your credit report, making it harder for scammers to open new accounts in your name. You can lift it anytime.
Summary generated by AI, verified by MoneyLion editors
Sources
Discover. 2026. "Applying for a Personal Loan Online vs. In Person."
FTC. "Use Two-Factor Authentication To Protect Your Accounts."
Alison Kimberly contributed to the reporting for this article.
You may like
Community Posts
Similar Posts
Disclosures
This material is for informational purposes only and should not be construed as financial, legal, or tax advice. You should consult your own financial, legal, and tax advisors before engaging in any transaction. Information, including hypothetical projections of finances, may not take into account taxes, commissions, or other factors which may significantly affect potential outcomes. This material should not be considered an offer or recommendation to buy or sell a security. While information and sources are believed to be accurate, MoneyLion does not guarantee the accuracy or completeness of any information or source provided herein and is under no obligation to update this information. For more information about MoneyLion, please visit https://www.moneylion.com/terms-and-conditions/.
MoneyLion does not provide, own, control or guarantee third-party products or services accessible through its Marketplace (collectively, “Third-Party Products”). The Third-Party Products are owned, controlled or made available by third parties (the "Third-Party Providers"). Should you choose to purchase any Third-Party Products, the Third-Party Providers’ terms and privacy policies apply to your purchase, so you must agree to and understand those terms. The display on the MoneyLion website, app, or platform of any of a Third-Party Product or Third-Party Provider does not-in any way-imply, suggest, or constitute a recommendation by MoneyLion of that Third-Party Product or Third-Party Financial Provider. MoneyLion may receive compensation from third parties for referring you to the third party, their products or to their website.