Loan scams Loan scams explained
Loan scams offer unsecured personal loans in return for an up front arrangement fee. The loan you're trying to arrange doesn't usually arrive. If it does, it may well be for less than originally agreed and will be subject to high interest and stiff penalties.
You could be targeted by loan scammers in a number of ways. Loan scams are advertised in newspapers, via leaflets and online. You may receive unsolicited letters from loan scammers through the post or be offered a loan over the phone or in an email.
Loan scam arrangement fees
Loan scammers promise victims low interest loans for an upfront fee
Most loan scams target people who have credit problems and can't access loans using conventional means. Potential victims of the scam are invited to apply for a loan by giving their bank details and enclosing a cheque for the loan arrangement fee, which is typically between £30 and £60.
The up front fee may be described as an loan arrangement, application or insurance fee. Loan scammers could also claim the fee is the first month’s loan repayment. Whatever it's called, the fee will be pocketed by loan scammers and the promised loan may never appear.
There may be a further nasty twist to the loan scam. When the loan cheque doesn't arrive, scam victims may be asked to call a premium-rate telephone number to resolve the problem, usually to no avail and leaving them further out of pocket.
Scam victims may also be asked for a second fee after they have applied for the loan. This extra money may be described as a loan completion or other administration fee, or scammers may pretend the first payment never arrived or is in some way insufficient.
If you're a victim of a loan scam
Report scammers if you think you've been targeted by a loan scam – it will help prevent others losing money.
Destroy any subsequent loan scam or fraudulent mailings and tell friends, neighbours and relatives to be on the look out for similar loan scams.
If you've given loan scammers personal information, such as your date of birth, bank details, and address, you may be at risk of identity theft. Read our guide to beating identity theft for advice on what to do next.
The Office of Fair Trading estimates that roughly 1 in 20 people fall victim to scams every year, collectively losing around £3.5 billion. Fewer than 5% of victims report their experience.
If you think you've been the victim of a loan scam, or you suspect a loan offer is a scam, contact Consumer Direct for advice.
