What’s a loan scam and how can I identify one?

In recent years, loan scams have followed a certain pattern. In many cases, the victim has needed a large loan and has searched for one – or even requested offers – online. A lender, often foreign, is found on the internet, who then squeezes sums as high as thousands of euros out of the victim. 

The good news is that loan scams are easy to identify. Most fraudsters are uninterested in the borrower’s repayment capacity or credit details, saying that they are ready to lend to anyone who applies. Alarm bells should also ring if the loan is agreed via an instant messaging service or social media channel. 

In addition, the loan’s terms and conditions may be too good to be true. If the interest rate sounds wonderfully low and the loan term is long, it’s a scam. In scams, there is either no proper loan documentation at all, or what documentation there is includes typos or other oddities. 

Never transfer money to strangers

If the victim is duped by wonderful lending conditions and agrees to take the loan, that’s when the scam begins in earnest. The criminal asks for advance payment for transferring the loan, possibly referring to fees charged by the authorities, taxation, or transfer costs. In most cases, the scammer will want these payments to be made into a personal bank account. 

If the victim pays once, more costs will follow in growing amounts. The loan amount will never be transferred to the victim’s account. Instead of being financed, the victim will be financing the criminal. 

The easiest way to avoid loan scams is by not transferring money into the account of a person or organisation you don’t know. If a lender, or someone claiming to be a lender, seems in any way suspicious, you should report them to the police. If you have already sent money to a criminal, tell the police and your bank.