What is a loan scam and how to avoid them?

Online lending has provided many Australians with a convenient way to apply for personal loans, car loans, and even mortgages. The rise in popularity of digital loans and more advanced technology has given cybercriminals more opportunities to take advantage by impersonating legitimate lenders and brokers. 

What is a loan scam? 

A loan scam involves a cybercriminal posing as a legitimate lender or broker in order to steal your money or get your personal information to use for identity fraud. This form of scam can be conducted through fake websites, online ads, or direct messages on social media. For cybercriminals, the goal is to get people to apply for a loan online through a fake website or over email or social media.  Or they will ask you to pay upfront fees to secure the supposed loan and require more payments before they release the funds that will never come. 

What are the different types of loan scams? 

Below are common tactics cybercriminals use to scam people out of their money or take important information: 

Loan application scam: Cybercriminals can get your information through fake online application forms. Once you’ve submitted the application, you’ll likely be contacted by someone posing as a lender or broker to finalise the loan by asking you to send in important documents such as a government ID, bank statements, and other personal and financial information.

Upfront loan fees scam: You are asked to pay upfront fees before the funds from the supposed loan are released to your account. Cybercriminals may say it’s for insurance, tax, or processing, all of which are not required by legitimate Australian lenders.  

Loan money transfer scam: You are asked to send payments for loan-related fees to a personal bank account instead of an official business account. It’s best to verify the information of the “lender” you’re talking to before sending anything, especially funds. 

Unsolicited loan offer scam: Cybercriminals may offer you a loan directly through email, SMS, or messages on social media platforms. They’ll try to sell you on incredibly low (maybe even zero) interest rates with a high borrowing amount, only for them to steal your information and/or funds. 

How to spot a loan scam 

Avoiding a loan scam can be easier if you know the signs. Here are a few red flags you need to watch out for: 

Offers guaranteed loan approval – Lenders are required to assess and ensure that their loan products are appropriate for the applicant. No legitimate lender will guarantee approval on any loan without checking an applicant’s credit or financial history. 

Use of aggressive and urgent language – Cybercriminals will pressure you to act quickly so you won’t have time to think or doubt their legitimacy. Trustworthy lenders will not use aggressive language and pressure clients into taking out a loan. 

Account names don’t match – If you’re asked to send payment and the bank account name does not match that of the lender, it’s likely fraud. Legitimate companies won’t use personal bank accounts for receiving official payments. 

The business or Individual has been flagged by the ASIC – Check the ASIC investor alert list to see if the business or individual you’re speaking with appears on the list as suspicious or unlicensed.  

Think you’ve been scammed? 

If you’re a victim of a loan scam, report it to the authorities and Scamwatch immediately.  Call your bank and ask them to temporarily freeze any transactions if necessary. For additional support, call IDCARE on 1800 595 160.