Buyers Tips

Advance Fee Loans

The Better Business Bureau and the Federal Trade Commission (FTC) warn against these red flags of advance fee loan schemes:

1. A lender who isn't interested in your credit history. Ads that make claims like "We don't care about your past. You deserve a loan" or even "No hassle - guaranteed" often indicate a scam.

2. Guaranteed loans. Legitimate lenders generally evaluate an application before they guarantee firm offers of credit - even to creditworthy consumers.

3. Fees that are not disclosed clearly or prominently. Any up-front fee that the lender wants to collect before granting the loan is a cue to walk away, especially if you're told it's for "insurance," "processing," or just "paperwork." Legitimate lenders often charge application, appraisal, or credit report fees. These fees are disclosed clearly and prominently; the fees are taken from the amount borrowed; and the fees usually are paid to the lender or broker after the loan is approved.

4. A loan that is offered by phone. It is illegal for companies doing business in the U.S. by phone to promise you a loan and ask you to pay for it before they deliver.

Your BBB also suggests you to:

* Seek credit locally before going across the country or out of the country. If turned down, make sure you fully understand the reasons why.

* Ask yourself, "If I can't get a loan locally, why is this company, which I have never heard of and doesn't know me, willing to make a loan"?

* Do not act immediately! Many advance fee loan schemes will try to get you to send money or give out credit card numbers before you get any paperwork or have a chance to check them out. Beware of claims that acting before the paperwork is provided to you will speed up the processing of the loan.

* Make sure you get references and investigate. Many of these schemes are merely telephone sales operations, so no connection will exist to an established financial institution. Ask which lenders the "loan broker" deals with and have them checked with the BBB in the cities in which they are located. You may also wish to contact PhoneBusters, an agency that investigates telemarketing fraud out of Canada. PhoneBusters can be reached at 1-888-495-8501.

* If you have been victimized--complain. Any individual or business owner who suspects that they may have been swindled should make a complaint to the BBB where the company is located.


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