Advance-Fee Loan Scams

Advertising and promotional claims for advance-fee loans imply that you will get a loan no matter how bad your credit is, but in order to take advantage of this offer, you must first pay a fee. That's the scam. People in desperate need will pay the fee, but there is no loan. There never was.

Legitimate offers of credit, even those that claim to be guaranteed, will not require a payment before the loan is processed. Many will have associated fees for application processing, appraisal or credit bureau reporting, but you fill out paperwork sent by the lender before the fee is generated. You also send this fee directly to the lender, and not to a third party handle like a broker. If there is a broker fee to be paid, the lender handles it.

To protect yourself from this type of scam, make sure you know who you're talking to and where you'll be sending the money before accepting any kind of loan offer. Check the company out online and look for customer complaints. If it's a scam, people will post about it. A few complaints are unavoidable for any business, but a flood of complaints is a red flag not to do business with this company.

Here are a few general common sense rules:

*Never give your personal information to any caller without checking the company out thoroughly. This includes bank account information, credit card, and Social Security Number.

*If someone asks you for money before you fill out information for a credit check, it's a scam. It's illegal for a company to take your money before the loan offer is made, based on the promise of a loan.

*Remember what your mother always said, "If it sounds too good to be true, it probably is"

Advance-fee loan advertising is usually found in the classified section of the newspaper and often offer "900" numbers to call. That will be the first amount of money you lose when responding, charges on your phone bill. They may also advertise through commercials, infomercials, mail, and radio. That means they are successfully generating money, but it does not mean it's a legitimate offer. Many of them use phone lists to call you at home. If someone calls your home and asks you for a credit card over the phone in order to process a guaranteed credt loan application, hang up. Especially if they claim it's a one-time offer only available right now.

Legitimate lenders often guarantee credit to credit-worthy consumers, but never before checking your credit. Few situations allow credit before performing a credit check. Typical exceptions to this rule are rental companies that charge outrageous prices for household furnishings, electronics and appliances, and some payday-type lenders that charge high interest but can be handy if you need money fast and have the means to pay it back quickly.

If you have receive one of these calls, get as much information as you can and report it to the FTC (Federal Trade Commission) on their website or by phone at 1-877-FTC-HELP. The FTC cannot help you recover your money if you've been scammed. Their purpose is to identify and shut down this type of fraudulent activity.