Borrowing money and performing financial transactions does create some level of risk. People who are looking for options for borrowing money or taking out a loan for their student’s college tuition and expenses should beware of loan scams.
Just as there are plenty of legitimate opportunities for parents to help fund their child’s education, there are also many chances for ill-meaning people to attempt to scam people out of their money. Companies that are well-known as less likely to be involved in this type of thing, but it pays to be cautious, no matter which company or institution you are dealing with.
What does a student loan scam look like?
Having experience with what is expected of student loan institutions and lender will help make it less likely that someone can be scammed. Experience is important and after a while, a scam can be easy to spot. When it’s not, asking questions of the lender that are direct and specific can help illustrate whether the offer is legitimate.
Below are some of the “red flags” that might indicate the company you are dealing with is conducting a scam. None of these factors guarantee it is a scam, but you should observe these factors carefully and investigate it to make sure a deal is fair and legitimate.
1. Asking for upfront loan fees
When a company asks for upfront loan fees, this is something to be suspicious about. Legitimate loan companies do not need to collect fees upfront. The contract is supposed to cover all of the costs of the loan plus interest. Read it carefully and ask questions if something doesn’t make sense or seems to be too vague. Do not pay anything upfront. This goes against the basic business practices of banks and lending organizations that require a lender to advance the money to a borrower before asking for any payback.
2. Promises of loan forgiveness
Mailers promising loan forgiveness to borrowers that sound too good to be true probably are. Be suspicious of these deals because there are thousands of them out there, all promising to rid you of your student loan debt. While it is true that President Trump is working on getting more people qualified for student loan forgiveness, many loan forgiveness programs offered by a private lender are not legitimate. This is supposed to appeal to people who want to get something for free and there are no such offers that are legitimate except for federal legislation that allows people in certain professions to have partial loan forgiveness. Check it out carefully to be sure it’s legitimate.
3. High-pressure sales tactics
Legitimate loan companies and federal lending institutions offer a number of federal student loan opportunities. But they are all offered through the FAFSA website and other legitimate channels. Private companies are more likely to advertise aggressively to get people to respond to their offer. However, it’s important to watch for overly ambitious sales ads that sound too good to be true.
4. Phishing scams may ask for personal or sensitive information
Be careful that the loan companies who are offering the deal are not more interested in gathering your personal information than getting you to sign up for a loan. Some companies masquerade as a loan company when really they are just gathering personal data to use for other purposes. Identity theft can easily occur when borrowers trust the company without looking into what they are about.
5. Over-advertising on social media sites
It’s fine to see an ad or two about a company that is offering student loans. But oversaturation of ads indicates a level of desperation that raises a red flag. Why is the loan company so intent on getting borrowers? If they seem too pushy and they don’t give borrowers a chance to look over the contract carefully before signing, something is awry.
Legitimate companies are happy to give people time to consider a deal before signing. It is not to their advantage to sign up people for loans that they cannot afford to pay back. Illegitimate companies, however, may have other things to gain from signing up borrowers. Read the fine print and find out what it says about borrowers who default. Some companies lure people into signing and then sue them when they can’t pay it back.
Unfortunately, loan scams don’t end there. Check these warning signs of student loan forgiveness scams so you don’t fall victim to one!