Many times, entrepreneurs must turn to outside funding options to start up their new business. They will look for help from their family and friends, loans from banks, SBA loans, venture funds, and angel investor funding. If they are unable to get all of the financial help they need from these sources, then they might look into other options. Many times they will look to loans that are guaranteed, no matter their credit rating.
There is a lot to be said about these loans, and it is really no good. It is actually a scam. Consumers are drawn in by their advertising techniques. Loan officials will usually take information over the phone and run the application. They will have to submit a lot of information, including their driver’s license number, employment records, social security number, bank information, credit card information and much more. They will then be told that they have been approved, but must pay a fee to get their money.
Most of the scammers will refer to this fee as a premium fee, or even a processing fee. Most of the time, the scammers will not ever even send the money. This can be very dangerous, especially for entrepreneurs that are getting ready to start up a new business. On top of never receiving the money, they also are at risk for identity theft because they gave out so much of their personal information.
Here are a few of the biggest signs when it comes to loan fraud:
- Asking for personal information immediately.
- Asking for advance fees immediately.
- Not providing any location information.
- Offering “guaranteed” approval
- Errors in any written communication.
- Asking for immediate payment before the loan is even confirmed.
Many of the scammers out there will use logos and names of reputable business to conduct their criminal activity. If you want to avoid being scammed out of your money, you might want to look for a loan locally. Sometimes, there are fees associated with taking out a loan. These may include application fees, appraisal fees and credit reporting fees. These are generally fees that will be taken out of the loan amount instead of requested up frong.
Tips to follow:
- Discard mail that you receive that offers you something that is too good to be true.
- Don’t bother with pre-approved loans.
- Don’t open any emails that claim to offer loans with a fee paid up front.
- Ask investors to give you their personal information.
- Check with the BBB to ensure the legitimacy of a lender.
- Try to deal with local lenders.
- Don’t pay up front for any type of loan application.