Loans article: What are Advanced Fee Loans?

Article Tips > Loans

If you have bad credit, you may become the target of an advance-fee loan scam. These common scams are often advertised as "bad credit ok" loans. You'll find them in the newspaper, on the internet and on billboard signs.

They make it seem quite simple. All you have to do is call a phone number or fill out an online application for a quick and easy approval. However, once you call, you find out that before you can borrow any money, you must pay a processing fee or a security deposit. Once the fee is paid, you never hear from the company again. They simply disappear.

Consumers with bad credit or recent bankruptcies are most often targeted by these scams. The scam itself is hard to recognize until you are asked for the up-front money. By this point, you've probably already given out your personal information to someone who will use it fraudulently.

The warning signs of an advanced fee loan scam are:

Approval guaranteed with no credit check and/or regardless of your credit history.
A phone number and/or address in another country.
Requirement that you provide money up front in the form of a fee or deposit. Not a down payment.
Require that you wire the funds instead of hand over a check.
Recorded messages that tell you to call another phone number.
Legitimate credit offers will not require you to pay an up-front payment. Some lenders may charge you a small amount to process your application or obtain your credit report, but these amounts are often around $10 to $25 and are often added to the amount you borrow.

No legitimate lender will ever guarantee that you will receive a loan. You have to apply and have your credit checked before you will be approved or rejected on a loan. Anyone who contacts you over the phone or by internet to give you a loan without a credit check is not legitimate.

Remember, your credit history does matter. If you have poor credit, you should expect to pay a higher interest rate if you are approved. It can often help to shop around. If you are offered a rate that is drastically below that of several local lenders, you should be wary. Most lenders charge in the same ballpark when it comes to interest rates.

If you are going with a non-local lender that you haven't heard of before, you should ask for the company's address and verify it. You should call both the Better Business Bureau and your state attorney general's office. Never wire money or send a money order in order to secure a loan. A legitimate lender will never ask this of you. If you are pressured, take your business elsewhere.

No legitimate lender will ever ask you to make a payment to an individual for any fees associated with a loan.

Be cautious when looking for a loan. There are many scams out there that are very hard to detect. You often won't even know that you have been scammed, at first. If you do find that you are a victim, call the newspaper, TV station or radio station that ran the ad so that they can stop running it. File a police report to help establish a record of the crime. This will be very helpful if your identity is stolen. You should also call the Federal Trade Commission and your state attorney general's office to file a report.

About the author of What are Advanced Fee Loans?

Martin Lukac http://www.MartinLukac.com , represents http://www.RateEmpire.com , an Internet consumer banking marketplace. RateEmpire.com is a destination site of personal finance, investing, taxes and mortgage rates. RateEmpire.com provides mortgage guides and financial rates and information. RateEmpire.com also operates a financial portal #1 American Financial, found at http://www.1AmericanFinancial.com