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.

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Quick Take

• Personal loan scams typically involve pressure tactics, upfront fee demands and promises of guaranteed approval with no credit check. If a lender asks you to pay via gift cards, wire transfers or crypto, that's a major red flag.

• You can verify a lender in about 10 to 15 minutes by checking the Nationwide Multistate Licensing System (NMLS) database, your state attorney general's website and the Better Business Bureau (BBB) for complaints and licensing status.

• If you've been scammed, stop all contact with the scammer immediately, file a police report and place a credit freeze with Equifax, Experian and TransUnion to protect your accounts.

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 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 their “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 the 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 1-877-382-4357.

• Contact your bank: Reach out to your financial institution to 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 fees. 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 from a reputable lender directly. 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 careful 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 have this feature, but beware that they charge high interest.

• 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 legitimacy of the lender.

Terms To Know

• NMLS: This database allows you to find out if a lender is licensed.

• Guaranteed approval: Scammers use this term to lure borrowers into the scam.

• Phishing: This is a tactic used by scammers to get sensitive personal information and account information through fake emails or texts.

• Fake check scam: A scammer will send a fake check and ask you to send part of the funds back to them.

• Advance-fee scam: You’re asked to pay an upfront fee for a loan that will never be issued.

Personal Loan Scams FAQs

Still have questions about personal loan scams? Here are answers to some of the most common ones:

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.

Sources

• FTC. 2024. "New FTC Data Show a Big Jump in Reported Losses to Fraud to $12.5 Billion in 2024."

• FTC "What To Know About Advance-Fee Loans."

• New York State Department of Financial Services (DFS). "Predatory Loans and Loan Scams."

• Better Business Bureau (BBB). 2025. "BBB Scam Alert: Receive a call from Jessica at a loan processing company? It could be a scam."

• Consumer Financial Protection Bureau (CFPB). "Consumer Complaint Database."

• BBB. "BBB Tip: How to identify a fake website."

• Office of the Attorney General - State of Tennessee. "You Think You've Been Scammed. Now What?"

• Georgia Attorney General's Consumer Protection Division. "Scams: What to Do if You’ve Lost Money in a Scam."

• FTC. "What To Do if You Were Scammed."

• Attorney General of Texas. "Cash Advance and Advance Fee Scams."

Jeanine Skowronski contributed to the reporting for this article.

Photo Credit: iStock.com