Learn how to identify online loan fraud and fraudulent lenders

Nowadays, getting an online loan is easier than ever. In recent years, the alternative lending market has grown considerably, offering capital to those who traditional banks turn down. Unfortunately, many fraudulent lenders are also taking advantage of this trend, affecting legitimate institutions and damaging the confidence business owners have on loans online as alternatives to finance their businesses. Fortunately, you can minimize the risks of fraud by learning how to differentiate fraudulent lenders from legitimate ones. 

Are Online Loans Safe?

The answer is not quite as easy as yes or no; it’s actually a bit complex. But what we can assure you is that online lenders are NOT synonymous with fraud.  The reality is that online loans are safe, but like with all things in life, there can be people willing to take advantage of you. For example, you can receive a scam email, but that doesn't mean that all emails are scams, right?  The same goes for online loans.

While it’s completely safe to request an online loan, you do have to do our due diligence first and make sure you apply with a legitimate lender.

The good news is that you can learn how to differentiate between honest and fraudulent lenders. And we’re here to help you! Keep reading to find ways to discover if it’s a real loan or loan fraud.

How to identify online loan fraud?

You can find a ton of reliable online lenders. But there are also some malicious lenders who are after your money.  As a good rule of thumb, if it sounds too good to be true, it could be a scam.  Here are 6 ways you can identify these frauds:

1. They have fake addresses and phone numbers

Make sure their address and phone number are real. Avoid companies whose address is a P.O.box or those you can only contact by leaving a message on an answering machine. 

2. They demand upfront fees

If the lender asks you to pay upfront, be careful. This is a strategy commonly used by scammers, who ask for money to process your application, but never actually process anything and keep your money. 

Many times they charge exorbitant fees or ask you to pay extremely high interest in advance.

Honest lenders never ask for upfront payments. 

Please note that it is normal for lenders to charge certain fees, but they only do so until after the loan has been approved. And most commonly, they are charged when you finish paying the loan or as a percentage of your regular loan payments. 

3. They ask you for prepaid cards or cash

This is another method to detect online loan fraud: lenders ask you to pay your loan fees (in advance) but with prepaid cards or by sending cash by mail or parcel. The problem with this type of fraud is that they are very difficult to trace, making it practically impossible to get the money back once you have sent it.

4. They assure you that, no matter what happens, your approval is guaranteed

Beware of lenders who offer to lend to about anyone without an approval process. 

The truth is that no legitimate lender would risk losing money by lending capital to anyone: all lenders have their own method of deciding whether to approve someone; it can be based on their credit score, their sales, etc. 

Like I said, if it sounds too good to be true, it could be a scam.

5. They pressure you and offer loans that can hurt your finances

Fraudulent lenders will generally pressure you to obtain a loan that is much higher than what you need or what you can pay. 

An honest lender will never give you a loan that is much higher than what you can afford; they may even only approve a lower amount than what you requested if they think that’s how much your cash flow can handle. 

Keep in mind; fraudulent lenders are often very aggressive and manipulative, so be careful.

6. Your contracts change or are blank

Another way to detect a lender who wants to take advantage of you is that they tell you a rate, but then they change it on the contract without informing you. Many times they might even try to get you to sign a blank contract.

#CaminoTip If the lender avoids giving you a copy of your own contract, it is probably a scam.

By following these recommendations, you can spot online loan fraud in a heartbeat.  Fortunately, organizations like the Federal Trade Commission (FTC) issue warnings about fraud. As industry leaders and consumers report these scams, it will be easier to identify them. 

What are the qualities of a reliable lender?

All of these risks can be avoided if you are looking for a reliable lender. 

But how can you know if a lender is trustworthy? 

Follow these 3 tips to choose an honest lender to finance your business:

1. You can find information on reliable websites

Many specialized websites create company profiles for many different sectors. Sites like Crunchbase allow you to search for any online lender, which should be in their database, even if it is a fairly young company. If you can't find a lender on these databases, be careful.

Another way to check a lender's information is by looking for reviews. Use popular review websites, like Google, Facebook, or TrustPilot. Take into account that all businesses have negative reviews (there will always be unhappy customers), but if they have more complaints than positive reviews, you should probably look for an alternative.

You can also search for information in other media, like news or finance and business websites. If the lender is trustworthy, there must be certain news and articles that speak of the online lender. 

2. They have all the necessary credentials and certifications

You can verify an online lender’s credentials yourself through different websites and government offices.

The Better Business Bureau is an organization that catalogs trustworthy businesses in different industries. You can search for a lender by name on this website to make sure it’s accredited by the Better Business Bureau. The better their score, the more reliable they are. 

Besides, an honest online lender will have official certifications or be registered with certain government agencies, like the Department of Business Oversight in your state. You can also contact the attorney general's office in your state (or the state in which the lender was created) to see if they are registered.

3. They have the best online security protocols

Legitimate online lender sites use the highest levels of encryption to protect their users' information. This means that they protect your data so that it cannot be stolen.

You can check if a site is secure if its URL begins with "HTTPS" instead of "HTTP" in the email address box. The S stands for Secure.

Also, secure sites have a padlock symbol 🔒 right before the website address.

Camino Financial: an honest and reliable lender. You are safe with us!

We usually talk about how easy and simple it is to get a loan with Camino Financial and that we are always here to help you and your business. But today, we want to talk about security.  At Camino Financial, we offer you all the guarantees that we are a reliable lender that will keep you, your information, and your money safe:

• We have all the required certifications: we are registered with the Department of Business Supervision in California.
• Our website is 100% secure because we want to take care of your information: we have an SSL certificate, an international security standard that only secure websites receive.
• We use the same technology as banks to guarantee the protection of your data and the privacy of your information. For example, we use PLAID, a 100% secure platform used by more than 10,000 banks. 
• We will never pressure you to get a loan or offer you more than we know you can afford.
• We have a fast, easy, and transparent loan process. Transparency is one of our main policies.
• Our work has been featured in many trusted news outlets, like the Wall Street Journal, CNN Money, NBC News, Reuters, Business Insider, and more.

Safely apply for an online loan

If you want your business to grow, at some point, you will have to consider a loan as a financing alternative. For many people, online lenders are more attractive because they are faster and more convenient than traditional lenders.  If you choose the correct online lender, you can make sure there are no risks.  Before choosing an alternative lender, check their credentials and make sure they use the latest technology to protect your data. At Camino Financial, your information and privacy are in good hands. Your security is our main concern. 

Learn more about our loans!