How to Check if a Loan Company Is Legitimate


Due to the global COVID-19 pandemic, many people are facing unemployment and financial hardships. Perhaps blacklisted or unable to secure credit, procuring a personal loan may be the only feasible option.

But, be forewarned. Consumers in the USA lost an estimated $3.3 billion due to fraudulent practices in 2020. Many of these losses are the result of loan scams.

So, how to check if a loan company is legitimate? We aim to answer all your queries and furnish you with the following information: what are loan scams, how to spot a loan scammer, types of loans frauds, and what to do if you’ve been scammed.

What Are Loan Scams and How Do They Work?

A loan con artist preys on a potential victim’s particular financial weakness. It could be debt, a recent job loss, or lapsed loan or mortgage repayments and foreclosures. Potential targets are contacted via phone, SMS, Whatsapp, email, online, or even face-to-face.

Fraudsters may offer unsuspecting consumers quick solutions to seemingly insurmountable financial problems. Scam loans are dressed up in attractive terms and often masquerade as legitimate deals, using valid details of actual registered financial service providers.

The key characteristic of illegitimate loans is the request for money paid in advance to the prospective lender. Money is cited as legal fees or process or admin costs. Once payment has been received, the swindler disappears without a trace.

DID YOU KNOW: One in three adults in the US have fallen victim to some extent of financial fraud. What’s more, contrary to popular belief, it is not only the elderly who fall prey to scams. The demographics are in fact wide-ranging. For example, millennials most commonly succumb to email con artists in particular.

How to Spot a Loan Scammer

Apart from watching out for the too-good-to-be-true terms and conditions, a scam can be avoided if you consider the following:

The Lender Does Not Ask For Your Credit History

Reputable financial service providers tend to pay particular attention to a debtor’s payment history and risk profile. Companies will also do a credit check before approving applicants as suitable for receiving personal loans. If a loan offer promises funds without a credit check, something is off. Heed the signs and steer clear.

Demand for Upfront Payment

The easiest way to identify a personal loan scam is if a lender demands money upfront. The best personal loan companies are prohibited by the Federal Trade Commission (FTC) to ask for any advance payments on loan applications.

This includes forwarding funds via gift cards, prepaid debit cards, wire transfer, or any other irregular mode of payment to an individual or group. Customers can call 877-FTC-HELP for assistance in this instance.

Website Isn’t Secure

If the loan company is asking you for online banking login details or passwords in return, sever the interaction immediately. Identity theft has become particularly prevalent in recent years. Being aware of the required website security protocols and safety measures may save you from being scammed. Take note of the following:

  • A secure website displays a padlock symbol to demonstrate security compliance
  • A safe website URL will use the HTTPS protocol, with the ‘s’ signifying a secure site

Never provide your Social Security number or other financial details online. This may very well lead to scams involving online loans, financial losses, and damage to your credit score as well as your reputation.

DID YOU KNOW: Identity theft statistics show that in July 2020 alone, the Federal Trade Commission (FTC) received 4,807 complaints about fraudulent practices involving identity theft.

You’re Pressured Into Making a Decision Right Away

How to check if a business is legitimate? Overly aggressive, high-pressure tactics are certainly a red flag. If you are urged to act immediately or asked to make a commitment on a deadline, chances are that you are being deceived.

There are reputable companies that offer personal loans with fast approval. But never act precipitously or without comparing trustworthy options first.

Fees Are Not Transparent

The federal Truth in Lending Act (TILA) demands that legitimate personal loans be made available to borrowers at standard interest rates and fees. Lenders disclose these fees upfront in order for the customers to be fully aware of the terms and limitations.

Fraudulent businesses and scam loan companies, however, are not transparent in this regard. Be wary of previously undisclosed fees.

The Lender Offers Guaranteed Approval

Scam loan providers usually go for high-risk borrowers or consumers with bad credit. Targets may feel an urgency to accept an offer of unencumbered, guaranteed approval for a personal loan. Legitimate loan companies do not guarantee approval, as it will depend on each individual’s financial situation.

Lender Is Untraceable, Without a Physical Address

A loan scam is usually a hit-and-run affair. Once the scammer gets what he wants, he becomes untraceable, without a physical location or storefront to back up the fake company. Victims have little to no chance of getting their money back, should this occur. A good way to spot a loan scam is to check whether the company that contacted you provides a physical address, phone number, and other contact details.

Unsolicited Loan Approval

Receiving notice of an approved loan under your name, without having applied for one, reeks of illegitimate solicitation. Do not accept these pre-approved loans.

Key Takeaways

If it sounds too good to be true, it probably is
Reputable lenders will not pressure you into a quick solution for your financial woes.
A loan company asking for online banking details is most likely fraudulent.
Demands for money upfront in exchange for loan services should send up red flags.
There is no such thing as guaranteed approval for a personal loan.

How to Check if a Loan Company Is Legitimate

Once you figure out how to fix your credit score, finding a legitimate lender to get your debt under control is the next step. So, how to check if a company is real?

Check if It’s Registered

Before committing to a personal loan, checking the registration of a lender company with the State Attorney General is paramount. It is similarly required by law for lenders to be registered with the US Securities and Exchange Commission. Additional state legislation may be applicable.

Check Contact Information

If you are suspicious about a lender, seek advice from the Department of Banking and the Department of Financial Regulation. These state departments hold registration information on personal loan companies in every US state.

Legitimate loan companies strive to have a strong brand identity online. If you cannot confirm their contact information, chances are that you are dealing with a front for online loan scams.

Phone numbers, emails, and physical addresses should be readily available online.

Check Online Reviews (Like BBB)

The Better Business Bureau (BBB) can assist consumers in finding out how to make sure a company is legitimate. People who suspect that they are about to be scammed by someone offering installment loans for bad credit can access the BBB Scam Tracker.

Up-to-date info is created and shared with recognized credit reporting agencies such as TransUnion, Equifax, and Experian to safeguard consumers against fraudulent businesses. Customer reviews collected in this manner, help prospective debtors in their search for suitable lending providers.

DID YOU KNOW: The Better Business Bureau Dispute Resolution Counsellor acts as a neutral mediator in disputes between two opposing parties.

Check if Their Website Is Secure

If you want to know how to find out if a business is legitimate, one other thing you can do is check whether their website is secure. Check whether it displays the appropriate padlock symbol and whether its URL link begins with HTTPS.

Remember that reputable loan companies will never ask you to provide banking login details or PIN numbers as part of a loan application. Observe safety measures in this regard.

Types of Loans Frauds

Personal loan scams come in a variety of schemes and guises. Here are some of them:

Loan Fee/Advanced Fee Scam

In an advanced-fee loan scam, consumers get duped into paying money upfront in exchange for unrealistic promises such as a line of credit, credit cards, or personal loans to improve credit ratings. Debtors who need bad credit personal loans are particularly susceptible.

Private Student Loan Forgiveness

In order to qualify for student loan forgiveness, there are certain requirements that have to be met. These include having made consistent payments over a specified amount of time and other criteria.

If you are contacted and promised private student loan forgiveness for a fee, it is undoubtedly a personal loans scam. Loan forgiveness is strictly regulated by means of your federal student loan servicer. Do not provide information about your FSA ID or password to anyone, even if prompted to do so.

Debt Consolidation Scams

Some consumers opt to consolidate their debt into one new loan with a single monthly premium. Debt relief scams promise to negotiate with creditors to decrease your debt by a substantial amount. Realistically, these scams compromise personal details and user identity and usually bleed even more costs from indebted targets.

Permissible debt consolidation solutions are available from reliable banking facilities.

Other Scams

Other personal loan scams to watch out for include eliciting car titles as collateral or tricking homeowners into signing ownership over to scammers to secure debt bailouts. The best identity theft companies can provide more information and guidelines in this regard.

DID YOU KNOW: An average of 28.8% of US consumers who used legitimate debt consolidation loans lowered or completely abolished their debt in 2020.

What to Do if You Have Been Scammed?

If you were a victim of fraudulent practices regarding personal loans, learn how to check if a company is legitimate in the USA to avoid being conned a second time. Here are some things you can do:

Provide Evidence to Law Enforcement

Reporting a loan scam as soon as possible is vital. Provide the local police department with evidence such as emails, call logs, screenshots, and messages. Impart as much detail as possible about your dealings with the fraudster.

Report to Specialized Agencies

File a detailed complaint with the FBI Internet Crime Complaint Center if you have been the victim of a personal loans scam. In addition to the FBI, also alert:

  • The US Postal Service if the scam was conducted via the postal service
  • The Federal Trade Commission (FTC)
  • The Better Business Bureau Scam Tracker

Log a Fraud Alert With Credit Bureaus

Credit bureaus such as Experian and TransUnion exist to keep tabs on consumer payment history and creditworthiness.

Fraudulent practices can have a negative impact on your credit rating. So, letting credit bureaus know you have been scammed is a wise thing to do. It enables them to send out fraud alerts on your account and to make other consumers aware of the potential dangers of online scammers.

Check Your Credit Report

As an added form of protection against further online loan scams, consumers should check their credit reports for unauthorized transactions. Retrace your steps and cover your online footprint as far as correspondence with the scammer goes. Cancel or block your credit card in order to protect against further damage. This may help to limit the chances of being exposed to further identity theft or other criminal activities.

DID YOU KNOW: More than 37,000 scam complaints were registered with the Better Business Bureau in 2019.


Knowing how to find out if a company is legitimate may very well protect you from heavy losses incurred by falling victim to scammers. Keep your personal and financial data safe and don’t trust a lender until you have verified the legitimacy of their details.

Be aware that legitimate companies do not offer instantaneous, guaranteed approval, so it’s best not to go looking for quick solutions to your financial problems.


What do I do if I get scammed by a loan company?

If you are taken in by one of the rampant scam loan companies out there, report your experience as soon as possible. Make a statement to the local law enforcement, the FBI, and the Federal Trade Commission (FTC). Also, notify the appropriate credit bureaus in addition to the BBB Scam Tracker.

Do loan companies check your bank account?

Loan companies need to investigate your credibility as a borrower before giving you a loan. They need proof of income and expenses to estimate your net worth. Most lenders will accept recent bank statements for this purpose. If you are classified as a high-risk borrower, the loan may be declined.

Will a loan company be asking for your online banking details?

Loan companies may require bank details once your loan has been approved. If you are wondering how to check if a loan company is legitimate, be assured that a legit company never asks you to provide login details or passwords to access your accounts. If this happens, it indicates fraudulent practices.


I learned a lot about finance after working for a digital marketing company specializing in investing and trading stocks, forex, etc. After that, I got exposed to other verticals such as wealth management and personal finance, which further improved my understanding of the financial world.

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