There's no such thing as a guaranteed loan and if someone happens to promise you a bad credit loan without doing a credit check, you can be sure it's a scam.
In a bad credit loans scam, the "lender" typically promises to send you a loan, but only after you first send a fee to obtain the loan. The fee ranges from as low as $50 up to thousands of dollars depending on the amount you're borrowing. The "lender" might call this a bad credit loan origination fee, loan insurance fee, or even collateral for the loan. You send the money and wait for your bad credit loan, but you never receive it. Unfortunately, by the time you realize what's going on, your money's long gone.
It's actually against the law for a company to promise to loan you money in exchange for a fee. Not only do legitimate lenders not require a payment to let you borrow a bad credit loan, it doesn't make good financial sense to pay money to borrow money.
Signs of a Bad Credit Loan Scam
The most obvious sign a bad credit loan is a scam is a request for some type of upfront payment. There may be exceptions when you're applying for a mortgage. In that case, the lender might request that you pay a small credit check fee. This fee is usually rather small and doesn't accompany a guarantee of the loan.
Advance-fee and other bad credit loan scams usually guarantee a loan. They promise to give you a bad credit loan regardless of your credit history, income, or a past bankruptcy. No legitimate lender will give you a loan without some assurance that you're going to pay the loan back.
Some bad credit loan scammers ask you to call a 1-900 number to choose your loan. Then, they keep you on the phone for a long time so you incur charges on the 900 number.
The company asks/requires you to send payment in some way besides U.S. mail. Because there are strict mail fraud laws in the United States, scammers typically shy away from receiving payments through the mail. Instead, they often request that you wire the payment to them.
The lender is in Canada or the Caribbean. These are the two most common places that bad credit loan scams seem to originate. Just because the loan comes from somewhere other than those two places doesn't mean it's legitimate. Carefully compare the loan to the other criteria to verify the bad credit loan.
The company asks for your social security number, bank account number, or credit card number without providing you any written documentation on the bad credit loan. Avoid giving out sensitive information over the phone unless you initiated the call to a business you know and trust.
What If You've Been Scammed
If you've been the victim of a bad credit loan scam, contact your local law enforcement as soon as possible. You should also notify your state Attorney General, and the FBI if the company was from another state or country. It's also a good idea to let the Better Business Bureau know about the scam to alert other consumers about the trap.
