Loan scams: what to look out for
For those who are looking for their first mortgage, it is probably safe to say that your options for legitimate and reliable home loans are easy to find.
Nevertheless, if you are after a smaller loan or want to use an online bank, there is every chance that after googling ‘loans’ you will receive a phone call or email from a company you have never heard of before. This is not a rabbit hole you want to go down. If you are considering going for a loan with a smaller company, this chart of which bank is owned by who is a great reference to start with, but it is worth being aware of the following warning signs when dealing with loans.
An unwanted call
The first and most important warning sign is how contact is made. You may not have sought out information from a company but still receive unsolicited contact. There is a very strong chance that this is not a legitimate company. The key thing to remember is to just be wary.
Does the person who has written the email seem to have little to no grasp of spelling and grammar? This is usually a very easy thing to notice and more than one obvious spelling mistake or grammatical error is usually a sign of a scam. Legitimate companies invest too much money in their digital correspondence to be making those sorts of mistakes.
Pay now scams
Some companies may request an initial payment to cover insurance or transfer fees. This is a very common scam. The sum of money may not seem too large to you. It may even be made to seem more legitimate by an official looking invoice. Regardless, you should not be paying money upfront for a loan for any sort of ‘transaction’ process.
A recent method taken by scammers is to steal the identity of an existing company to request upfront fees. You may be thinking that all is lost. Yet, short of never sending money to a company for upfront ‘taxes’ or ‘insurance fees’, there are other ways to avoid falling victim to a scam.
Scammers are becoming more sophisticated in their methods. They sometimes even build websites that mimic those of the company whose identity they have stolen. These can be very close imitations with small differences that may not be easy to pick out. A good way of verifying the validity of the company is by calling their contact number provided. Or try googling their address or the company name to see whether there is another website with a different URL.
As a new or existing homeowner, there is every chance that you may be contacted by a company or individual. They will claim that they can help modify your mortgage to work in your favour. The key rule to remember is that if it seems too good to be true than it probably is.
The same rules apply for loan modifiers as for personal loans. Don’t hand over your money in the form of an upfront fee for any reason. However, this area of scamming can get more confusing. A company or individual may give you advice for modifying your mortgage. These could be things such as suggesting that you refuse to pay your mortgage until changes are made or to even pay them or that they can actually ‘guarantee’ that they can get your loan modified or your foreclosure stalled. These are methods of establishing trust before you are asked to spare some of your money in some form.
Just remember that if you want to modify your loan or you want to take out a loan or mortgage, then you are the one who should be contacting them. If you do contact a smaller company or individual, be aware of the small signs that may indicate unprofessionalism at best or a scam at worst.
For more information it is worth checking out ASIC’s list of unlicensed companies who have been noted as making unsolicited contact with individuals.