Avoid Popular Loan Scams Disguised as Financial Fairy Tales

Consumers who find themselves squeezed tight in a money pinch can easily become victims of popular loan scams. Throughout history, parents have told their children comforting bedtime stories which always end with the unsavory character meeting his due punishment and the good guy living happily ever after. 


However, in the real world of adult finances, billions of dollars are swindled from unsuspecting people despite promises of guaranteed money. This article will explore some of the most common of these dastardly deeds. Avoiding popular loan scam topics:

1. Give Money to Get Money

3. Guaranteed Approval/No Credit Check

5. Stranger than Fiction Repayment Requests

2. Unsolicited Offers of Credit

4. Stranger than Fiction Repayment Requests

Give Money to Get Money

This popular loan con, which requests a borrower to pay money up front, started many years ago. An origination fee via wire transfer was required in order to start the loan process. Over time, too many consumers caught on to this farce. The bad guys devised a new scheme to steal money from borrowers that targeted people with bad credit, slow credit, or other credit issues.


Rather than asking for wire transfers, borrowers must provide debit card information as collateral for the loan. They promise no funds will be withdrawn from the card; it supposedly is needed to verify the consumer has an open account. The ending to this story is predictable. The debit card is drained, the lender disappears. 


The lesson in this story is that borrowers should become familiar with the loan process. For instance, with few exceptions, creditors will not ask for money or access to money to approve a loan. When applying for a mortgage, auto, or other secured credit there may be upfront costs, like down payment, origination or other fees. But any up-front money required will be clearly documented and detailed. Reputable lenders will be more than glad to answer any questions prior to a request to sign paperwork.

Unsolicited Offers of Credit

Once upon a time there was a hard-working lady who found herself in financial trouble after an unexpected emergency. For weeks she worried what she could do to come up with the extra cash to catch up on her auto loan payments. She considered taking on an extra job, selling some of her furniture, and borrowing money from friends and family. But alas, none of these ideas were possible for her situation. 


One morning she was checking her email and saw one with the heading “Absolutely Guaranteed Approval on Personal Loans!”  Initially, she scrolled pass the email and answered the one from her Aunt Belinda bragging about her cousin’s upcoming wedding. She pondered whether to open the loan email. With a long sigh, she clicked on the link to open it and saw this:


“Dear         :

We are pleasure to let you know you half been approved for a $10,000.00 personal loan! You don’t need a credit check or down payment with very much low rates. Guaranteed all applications will be approved. No more money worries. $500 bonus if you use PayPal. To get your cash by tomorrow click here.”


At first, the fair lady felt a ray of hope. But after reading the email again, she became skeptical about whether this was a genuine offer and decided otherwise and sent it to spam. What were the signs that this offer of credit was most likely a scam? An unsolicited personal loan offer is most likely bogus if it includes:


  • A blank space where there should be the recipient’s name. Authentic lenders address a potential borrower by name. When an email (or any other mail) starts with “Dear Blank Space:”, it is a mass email sent out to millions of hacked email addresses to trap as many people as possible.


  • Spelling and grammatical errors. This is a sure red flag since legitimate businesses never send written communication with less than perfect spelling and grammar.


  • Incentive to use PayPal. The loan scammers often try to trick people into using PayPal because they can snatch the money fast and tracking transactions is harder than with regular bank accounts.


Sometimes consumers get real offers of credit without making an application. Usually, it is from a current creditor rewarding the borrower’s good payment history. Or it may be a sincere offer for credit from real lenders who have done a ‘soft pull’ on the individual’s credit and believe their financial product would be a good fit.

Guaranteed Approval/No Credit Check

Creditors have no way of knowing if a consumer can repay personal loans without checking to see how they’ve paid other lenders. At best, such an offer could lead to a predatory lending trap in which the borrower is buried in debt because the fees and interest are out of this world. 


Even when people with excellent credit are offered new lines of credit without asking, there’s always a disclaimer “subject to credit approval”. This is because a person’s ability to pay back loans can change quickly due to reasons such as:

Lenders want to know a borrower’s current financial state before giving final approval on a loan. A credit check is the first step in this process. Loan schemes are designed to convince people that this can be avoided altogether with great results. 

Stranger Than Fiction Payment Requests

Some popular loan scams involve the lender asking for an unusual form of payment. Any loan payment should be paid to the lender. Canadian borrowers, as well as borrowers from other countries, should suspect they are dealing with a con artist if:


  • The fake lender asks for repayment with a gift card
  • A request to make payment directly to an individual, not a verifiable company
  • The loan payment involves a wire transfer
  • The scammer asks for cash payments


Tricking people out of money is big business, especially with the help of modern technology. Scammers look for people who are desperate to get loan approval. They also target young and elderly people. But in the end, any consumer can fall prey to popular loan scams if caution is not exercised.

5 Tips to Avoid Popular Loan Scams

It Is impossible to live and do business in Canada or anywhere else without the possibility of exposure to some type of fraud. A few tips to lower the risk of being a victim to unscrupulous people posing as lenders:


1. Borrowers should never give out bank account numbers in advance. This information should be provided when the lender has been thoroughly cleared as a bona fide creditor.


2. Loan scammers commonly copycat the name of an existing lender. A dead giveaway of this tactic is if the web address name is different and the email addresses do not have an extension with the company name.


3. Consumers should always verify a lender before accepting a loan offer using resources like the Better Business Bureau, consumer protection agencies, and the State Attorney General’s Offices in the United States.


4. Sometimes, reassessing a financial situation may uncover that the issue can be put off until cash is available. When real financial emergencies do arise, there may be other solutions like borrowing from relatives, loans against retirement accounts or employer pay advances.


5. It is important to stay alert to any suspicious activity by monitoring credit, changing all passwords regularly, and checking bank and credit accounts frequently.


Unfortunately, Canada and most other countries in the world are rife with “big bad wolves” that prey on innocent victims who are merely trying to get themselves out of some type of financial bind. They use whatever means they can to reel people into a scam with fake promises of hassle-free approval, low payments, and little or no interest. But the alert borrower recognizes fact from fiction, resulting in a happier ending.

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Sheila Kay

Sheila Kay is an author, ghostwriter and editor residing in the Atlanta, GA area. Among her favorite writing genres are creative nonfiction, self-improvement, and finances. Her first published book, PTSD and the Undefeated Me, is a memoir which has been a stepping stone to her involvement with mental health advocacy for military and civilian men and women. She is currently working on the first fiction novel to be published under her name. For more information or to purchase her books, visit Sheila’s Author Page on Amazon.com.