Personal Loan Scams: How To Spot, Avoid and Report Them

Personal loan scams occur when fraudsters pose as fake loan companies to get your money and personal information. Per the Federal Trade Commission (FTC), people lost $15.9 billion to imposter scams in 2024, the second-highest category of fraud by reported losses.

Learn how personal loan scams work and how to recognize the red flags to avoid getting duped.

MoneyLion offers a service to help you find personal loan offers. Based on the information you provide, you can get matched with offers for up to $100,000 from our top providers. You can compare rates, terms, and fees from different lenders and choose the best offer for you.

Key Takeaways

• Personal loan scams lure borrowers with promises of guaranteed approval, no credit checks and unusually favorable terms — if an offer sounds too good to be true, walk away and verify the lender independently before sharing any information.

• Upfront fees are a primary red flag — legitimate lenders deduct fees from your loan balance and never demand payment before you receive funds.

• You can verify any lender quickly by searching their NMLS ID at nmlsconsumeraccess.org, checking your state attorney general's licensing database and reviewing complaints on the CFPB's Consumer Complaint Database.

• Acting fast limits the damage — if you've been targeted, stop all contact with the scammer within 24 hours, report the incident to the FTC at ReportFraud.ftc.gov and notify your bank to protect your accounts.

• A credit freeze can help shield you after a scam by blocking fraudsters from opening new accounts in your name with any personal information you may have shared.

Summary generated by AI, verified by MoneyLion editors

How Do Personal Loan Scams Work?

Personal loan scammers prey on borrowers to reveal personal information and get money for loans that don’t exist. They use "too-good-to-be-true" lingo and loan terms to hook a target.

For example, they may tout "guaranteed approval with no credit check" or offer exorbitant loan amounts with uber-low interest rates or long repayment periods.

Some scams also involve mailed checks that activate a loan when deposited, so it’s important to understand how a live check works and how these offers can be used to mislead borrowers.

Common Tactics

• They'll ask you to pay for an upfront application, processing or insurance fee for the loan.

• They'll use that information to deposit a fake check and ask you to repay the amount with gift cards, wire transfers, cryptocurrency or peer-to-peer (P2P) payment apps to qualify for more funding.

• They'll direct you to call a 1-900 number that results in charges on your phone bill.

• Along the way, they’ll tell you to act fast as a pressure tactic.

Red Flags: Is This a Personal Loan Scam?

Watch for these warning signs that a loan offer may be a scam:

• Upfront fee required? Stop and verify lender's licensing

• Guaranteed approval? Likely a scam

• High-pressure tactics? Do not move forward

• Payment request by gift card or Zelle? If yes, then it’s likely a scam.

• Requests for bank account login and password? Stop all correspondence

• No physical address? Do not engage

How Can You Verify a Loan Company Fast?

Here’s a quick verification checklist you can use to verify a loan company:

• Confirm the company’s legal name: You can look at the website’s footer to find the company’s legal name as well as its “Doing Business As” names.

• Check the state licensing: Go to your respective state licensing database through the attorney general’s website or other state government website to verify the company’s license.

• Look up the NMLS ID: Most lenders have an NMLS ID. You can check the NMLS website to find your lender.

• Read reviews: The BBB often rates various lenders and lists complaints. You can also do a search on the Consumer Financial Protection Bureau (CFPB) to review complaints and lawsuits. You’ll also want to see if the company responds to complaints.

• Check the address, phone and email: You can check by using Google Maps. If the address is a P.O. Box, a home address or you can’t find it, that’s a red flag.

• Do a scam search: Type in the words of the company plus “scam” and see what comes up when you search.

How To Interpret What You Find

Once you’ve completed your search, here’s how to make sense of the results:

• If the company is licensed — meaning you find it in NMLS or on a government website — and the company is active, you can move forward with your application.

• If the company is unlicensed and you didn’t find it in any of the databases, then do not share any of your details with the company.

• If the company’s status is unclear, it may be a spam or spoofed site. Do not reveal any information.

Real Lender vs. Scammer: Key Differences

Use these signs to distinguish between legitimate lenders and scams:

What Should You Do If You’ve Been Scammed?

If you find out you’ve been scammed, you need to act quickly. Here’s a timeline of what to do:

Immediate Steps: 0 to 24 Hours

• Cease communications: Stop answering phone calls or replying to texts, emails or from the fake company. Be wary of new unsolicited communication from unfamiliar numbers or addresses.

Next Steps: 24 to 48 Hours

• File a police report with local authorities: You can report the scam to the FBI's Internet Crime Complaint Center.

• Notify your state's AG or financial services department: They'll investigate fraud patterns in your area. You can find your representative on the National Association of Attorneys General (NAAG) website.

• File an FTC complaint: You can do so using its online complaint website or by calling 877-382-4357.

• Contact your bank: Report compromised banking information and replace debit or credit cards.

Follow-Up Actions: 3 to 7 Days

• Credit freeze: Credit freezes prevent fraudsters from opening new loan accounts in your name — and are particularly important if you give a scammer sensitive personal information. You can utilize one by contacting major credit bureaus like Equifax, Experian and TransUnion.

• Pull your credit report: The bureaus also offer identity theft monitoring for a fee. However, you can obtain free weekly credit reports at AnnualCreditReport.com, and your bank or credit card issuer may provide you with free access to your credit scores.

Where Can You Safely Get a Real Loan?

One of the best ways to avoid a loan scam is to seek financing directly from a reputable lender. While scams are common, it’s important to remember that personal loans aren’t necessarily bad — it depends on how you use and manage them.

• Banks or credit unions: Traditional financial institutions are subject to regulatory oversight and legal consumer protections. Start your search with these top credit unions or banks for personal loans.

• Online lenders: These fully digital companies often offer competitive rates, but you'll want to verify their accreditation and reputation.

• P2P lending platforms: These non-traditional marketplaces connect borrowers to willing lenders. P2P lending has pros and cons, and you should carefully vet them.

Keep in mind that personal loan scams differ from prequalified loan offers, which can come from legitimate financial institutions or marketplaces. You can verify a prequalified offer's authenticity by looking for loan fee disclosures, opt-out notices, privacy policies and verifiable contact information.

Exceptions To Watch For

Some situations may look suspicious, but aren’t necessarily scams. Here’s what to watch for:

• Prepaid fees: Some legitimate lenders may require prepaid fees. However, this is fully disclosed and usually never requires unusual payment methods like crypto.

• No-credit-check loans: Payday loans may offer this feature, but beware that they charge high interest rates.

• Small community lenders: These lenders are legitimate but may require independent verification.

Final Takeaways

• Personal loan scams often use pressure tactics, upfront fees and don’t require a credit check.

• You can verify your lenders' legitimacy quickly by checking the NMLS website, the state attorney general or other state financial resources.

• If you’ve been scammed, stop communicating with the scammer, file a police report and notify the AG.

• You can safely get a personal loan from banks, credit unions, online lenders and P2P platforms. It’s up to you to verify the lender's legitimacy.

Personal Loan Scams FAQs

How can I tell if a loan offer is fake?

A loan offer may be fake if the lender has a fake website, no verifiable address, no license or requests payment upfront.

What are the most common loan scams?

The most common scams are requests to pay upfront, fake checks sent in the mail that you have to pay back, and phishing to reveal your bank account information.

Can scammers access my bank account?

If you share your login information or bank account numbers, scammers can get access to your bank account.

Can I get my money back?

Not always, but if you act quickly, you may have a chance. Contact the FTC if you’ve been targeted in a scam.

Do legitimate lenders charge upfront fees?

Legitimate lenders do not request upfront fees.

How do I verify an NMLS ID?

You can use the database NMLS to check whether a lender is licensed.

Are wire or crypto payments reversible?

No, scammers prefer these payment methods since they can’t be reversed.

Key Terms

• Personal loan scam: A fraudulent scheme in which impostors pose as legitimate lenders to collect upfront fees or personal information for loans that don't exist.

• Advance-fee fraud: A scam tactic in which victims are pressured to pay an application, processing or insurance fee upfront before receiving promised loan funds that never arrive.

• Impostor scam: A form of fraud in which criminals pretend to be a trusted entity — such as a bank, government agency or licensed lender — to extract money or sensitive personal information.

• NMLS (Nationwide Multistate Licensing System): A government-administered database consumers can use for free to confirm whether a lender or financial professional is licensed to operate in their state.

• Phishing: A deceptive tactic in which scammers use fake emails, texts or websites to trick people into disclosing sensitive financial or personal information.

• Credit freeze: A tool that restricts access to your credit report, preventing new accounts from being opened in your name; free to place and lift at each of the three major credit bureaus.

• Peer-to-peer (P2P) payment app: A digital tool — such as Zelle or Venmo — that enables instant money transfers between individuals; scammers favor these methods because transactions are typically irreversible once sent.

Sources:

• FTC: ReportFraud.ftc.gov

• CFPB: Fraud and Scams

• FBI: Internet Crime Complaint Center (IC3)

• NMLS: NMLS Consumer Access

Summary generated by AI, verified by MoneyLion editors

Jeanine Skowronski contributed to the reporting for this article.

Jasmin Baron, CCC™, contributed to editing this article.

Photo Credit: iStock.com