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Looking for a loan online? How to spot the scams

Man and woman's hands handing pile of cash
Posted at 5:00 AM, Oct 07, 2020
and last updated 2020-10-07 09:35:38-04

PHOENIX — So you're out of work and need a little money. Or maybe you're having trouble paying back student loans and looking for a better deal.

There are a lot of loans being offered now at great rates. But beware. Some of the scams are hard to spot unless you know where to look.

Ken Brewer didn't know his daughter was looking for a loan online until it was too late. Now he's warning you.

Brewer says his daughter wanted money to find an apartment and pay off her car. She found something online that said "Lending Tree." That is a legitimate business. So Brewer says her daughter applied and got an acceptance for a $4,500 from Apple Federal Credit Union. It too is a legitimate business.

But it turns out neither of the real businesses were involved. Their names were used to legitimize the scam. Brewer says in order to get the money, his daughter was supposed to pay a $400 upfront fee. And the fee was apparently ok'd by the Arizona Department of Finance according to an email.

Demanding upfront fees before a loan is illegal and a sure sign not to move forward. But right now, with so many people desperate for money, these scams are flourishing.

Looking for a lower student loan rate? The Better Business Bureau found 131 student loan consolidation scams in Arizona and Southern California. Victims were asked to pay an average $300-$400 upfront. But there were no loans and they had no affiliation with the Department of Education.

Brewer's daughter was asked to pay her upfront fees by buying Ebay gift cards. Before he knew it, Brewer says his daughter lost $250 and he's warning others so they don't become victims.

What are the warning signs? Demands for upfront money and paying something by buying gift cards is always a scam. Also, this was all done with no credit check. That never happens with a real loan. And it was all done by email. But the addresses are obviously fake. The supposed Lending Tree email came from an outlook.com address, not lendingtree.com.

Finally, do your research thoroughly. That Arizona Department of Finance used to legitimize the loan, does not exist.

Getting that money back is nearly impossible. In most cases, the crooks are operating in other countries. And if you're looking to consolidate student loans, it can be done for free on the department's website.

The Federal Trade Commission warns about loan scams and how to avoid them.