How to identify loan scams

Fraudulent behaviour has always been a sad reality. There are many unscrupulous individuals and entities just waiting to take advantage of innocent people through scams.

While these entities hide behind a guise of good intention, their nefarious schemes ultimately set unsuspecting citizens at a financial disadvantage.

We look at loan scams and ask experts exactly what they are and how you can identify them.

Tip: Click here to apply for a loan from a credible provider.

What are loan scams?

According to James Williams, head of marketing for online lending company Wonga, “Loan scams involve fraudsters calling or sending out unsolicited emails, SMSs, and WhatsApp messages to intended victims, promising loans and other financial products.

“These offers are made to appear attractive, with unrealistic interest rates or large loan amounts," Williams says. "Fraudsters usually request an ‘administrative fee’ or ‘deposit’ to secure the loan in question. Once this amount is paid, the scammers are quick to vanish, leaving their victims bereft of a substantial amount of money, and at further risk because of any personal information they might have supplied,” he says.

READ MORE: How to identify an investment scam

What are the tell-tale signs?

Fortunately, there are various signs that can help you identify loan scams. Ayanda Ndimande, strategic business development manager of retail credit at Sanlam, points out the following red flags.

• You are contacted out of the blue.
• You are asked to share your personal information.
• The offer seems too good to be true, mentioning very low-interest rates for example.
• There are spelling and grammatical mistakes in the message.
• There is pressure on you to act immediately, usually to pay an amount as an “admin fee” or to "activate an offer”.
• The message comes from a generic email server, e.g., a Gmail or Yahoo address.
• The only contact numbers given are mobile numbers.

Ndimande says, “If you are suspicious, rather contact the company from which you received the message and enquire whether it is a legitimate promotion and offer. They will definitely be able to alert you to the possibility of a scam.”

This is of course if you are approached by a company claiming to be well-known in the market, Ndimande notes.

She goes on to say, “If you have already fallen for the scam, then open a case with your nearest SAPS station, taking the promotional material with you. You can also forward the scam offer to the real company’s forensic department in order to assist in tracking the scammers down.”