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The holidays are over and you realize that you over-extended your already shaky finances. You receive either an e-mail, a letter in the mail, hear a radio ad or see a television commercial offering you a loan, regardless of your credit history, to help you consolidate your bills and get out of debt fast.
What do you do? If you are a savvy consumer, you delete the e-mail, throw the letter in the trash, and turn off the radio or television. You may also see these types of loan offers in the classified sections of the newspaper. Be wary of applying for loans where you call an 800, 877 or 866 area code. Be mindful that just because your local television, radio or newspaper airs or publishes these types of ads does not mean that the company placing the ad is legitimate or trustworthy.
If you investigate further, you'll find that the 'free' loan includes an upfront fee, sometimes ranging in the hundreds of dollars. These ads will say that the upfront fees are for processing your loan and credit checks. However, after you pay the fee, chances are you'll either receive nothing or a 'credit' card that can only be used for a certain company's products. This scam is called the 'advance-fee loan' scam and it is illegal in the United States.
No legitimate lender would require you to pay fees prior to receiving your loan. This is not to say that a legitimate lender would not charge you fees to get a copy of your credit report or for an appraisal, but these fees would be part of the total loan amount that you receive, or are payable at closing.
Another consideration to keep in mind is that a legitimate lender would never promise you a loan without first carefully reviewing your application and checking your credit report
There is never a quick credit fix. These unscrupulous scam artists prey on the elderly, the unemployed and those in dire financial straits. If you find yourself a victim of this scam, call the Federal Trade Commission at 1-877-FTC-HELP or file a complaint online. Keep in mind that these scam artists are usually working for an unscrupupous company.
Here's a checklist with some suggestions to help you avoid being victimized:
- If you cannot get a loan through your local community bank or other reputable financial institution, ask a friend or family member to co-sign a loan for you.
- Do not respond to an e-mail offering you a 'free' loan as it is probably fraudulent.
- Do not agree to pay any fees before you receive your loan. Remember, a legitimate lender will not require upfront fees.
- Do not be tricked into believing that your loan will be guaranteed regardless of your credit history.
- Be sure to get in writing exactly what you have been promised.
- Never give out your bank account information, social security information or credit card information unless you are positive that the originator is legitimate. However, understand that federal law requires regulated financial institutions to notify customers in writing that this information is required at the time of the loan application.
- 'If it sounds too good to be true, it most likely is!'
This information is provided with the understanding that the association is not engaged in rendering specific legal, accounting, or other professional services. If specific expert assistance is required, the services of a competent, professional person should be sought.
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