Beware of Dishonest and Predatory Lenders

Well-known lenders, like banks, become household names because they have a history of reputable lending practices.  The lucky customers who can qualify for credit with these companies do not have to worry that they will fall victim to a loan scam. The remainder of individuals who need a business or personal loan must exercise caution in order to avoid becoming prey to dishonest and predatory lenders.


1. Who is at Risk?

2. Scarlet Red Flags

3. Signs of a Good Lender

4. Legitimate Predators

5. What Victims Should Do

Who is at Risk?

Any person who applies for credit can fall victim to a fraudulent lender if they are not vigilant. Tech savvy humans today are used to fast paced finances; all it takes is one click to send, receive, or borrow money. Criminals posing as lenders are just as skillful at using technology, if not more so. Many borrowers have learned to watch for signs that a lender is not legitimate. Others are scammed and never saw it coming because they were more susceptible. 

Among potentially high-risk borrowers:

  • Young people without much experience with lenders.
  • Individuals who are desperate for a loan.
  • People with low or bad credit scores.
  • Owners of new businesses.
  • Elderly or disabled consumers.

The sole purpose of dishonest and predatory lenders is to steal money. Victims also suffer loss in the form of identity theft and living with a constant feeling of mistrust. But the tide is turning with regard to fraudulent lenders. Governments are imposing stiffer penalties and fines to loan fraudsters. And consumers today keep a keen eye out for fraud that may impact them or someone they love.

Scarlet Red Flags

Fake lenders are no different than other criminals. They slip up and expose themselves or leave behind clues that lead to their capture. Consumers today have banned together to spread the word about what to look for to avoid loan scams. Among the telltale signs is if the loan is guaranteed before credit score and income are verified. So-called lenders can also be spotted if they ask for unusual payment types like gift cards.


Other common red flags include:


  • The lender charges an origination fee for processing a loan before they will disburse funds. Origination fees should be deducted from the loan proceeds. 
  • A request for online banking login information.
  • An incomplete loan offer that does not include all terms, the final cost including interest, or contains errors in spelling and grammar.
  • The company’s physical address and contact information is not provided.
  • A loan offer that pressures borrowers to apply by stating that a reply is urgent because the offer will “expire soon”.
  • The loan company is not registered in the state or jurisdiction in which the borrower lives.
  • The lender’s advertising mostly consists of flyers on mailboxes, stuck in car windshields, and tacked to telephone poles.
  • The borrower is encouraged to lie on the application to get it approval.


Some fraudulent companies try to prove legitimacy with a professional looking website. But an online presence does not guarantee the company is reputable. Consumers should check with the Better Business Bureau to read about the company’s rating and any complaints from other people about its practices. Borrowers should also take advantage of sources online that publish reviews by individuals that have had experience with the business. 

Signs of a Good Lender

There are some indicators that a lender is probably legit, even if it is not well known. Like the red flags of bad lenders that scream “stay away”, spotting an honest lending company is easier if the borrower looks for certain signs, such as:

Lastly, borrowers are not discouraged from taking a loan offer to an attorney for review. In fact, good lenders prefer borrowers to do so, especially with large transactions like home mortgages and business loans.


Good lenders follow all local laws that govern how they do business. It is perfectly acceptable for a borrower to walk away from the table before signing if he feels uncomfortable because of something that is said or done out of the ordinary. Being proactive by any means is a mandatory financial protection. That may mean taking a step back to do more research before accepting a loan offer. 


If you’re one of the many Canadians in the midst of seeking an Alternative Lender, click the button below to ensure you’re well aware of how and where to chose the right one.

Legitimate Predators

Not all unscrupulous lenders are fraudulent. However, some companies approve credit and attach ridiculously high interest rates and other terms that are not to the borrower’s advantage. This credit approval is known as predatory lending. People with poor credit, low income, and no credit history turn to these types of lenders when they are unable to qualify for credit with traditional institutions. 


Predatory lenders are legitimate companies that follow all regulations required to stay in business. They get their name because they prey on unfortunate borrowers by charging them interest rates as high as 300%! One of the worse offenders are payday loan companies, who lock borrowers into an endless cycle of compounded interest payments that are so high that borrowers are unable to pay the principal.


The mortgage loan industry is another area rife with predatory lenders. Homeowner hopefuls will agree to pay almost anything for an approval. And while these lenders do follow real estate law, they take advantage of naïve borrowers who don’t know better. In the end, the homeowner gets stuck in payments he can’t afford or faces foreclosure. 


The same suggestions with regard to dishonest lenders are helpful in avoiding predatory practices. There is never too much research to be done when it comes to making sound financial decisions. There’s strength in numbers so, before signing, borrowers should seek advice online and from people they know and trust.

What Victims Should Do

Even some careful consumers have fallen victim to loan fraud, despite precautions. If this happens, individuals should take steps to report the crime. Among the crucial actions that should be taken:


  • A narrative about the experience should be written to reconstruct how the consumer was approached and all steps that were taken during the process.
  • In the U.S., the crime should be reported to the Federal Trade Commission (FTC). The complaint can be filed online. In Canada, complaints can be made with the Financial Consumer Agency of Canada (FCAC).
  • A report should be made to the local police.
  • State agencies like banking oversight or financial registration agencies, as well as the Attorney General, should be contacted.
  • Notify credit reporting agencies and other creditors of the fraud.
  • Change all online passwords and PINs.


Other tips for avoiding scams and fraud include not giving out bank account information, social security numbers, and personal data like mother’s maiden name in advance of a loan application. Borrowers should also watch out for copycat lenders who use similar names and logos of legitimate lenders. There is no option to relax the guard when it comes to credit. The number and types of dishonest and predatory lenders is staggering. Ideally, the day will come when most consumers do everything possible to prevent loan fraud from happening to them in the first place.

How useful was this post?

Click on a star to rate it!

Average rating 4.8 / 5. Vote count: 4

No votes so far! Be the first to rate this post.

We are sorry that this post was not useful for you!

Let us improve this post!

Tell us how we can improve this post?

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