How to spot personal loan scams

Personal loans can be incredibly useful, helping you with everything from a bathroom renovation to an emergency car repair. They can give you quick access to an unsecured lump sum of cash, which you repay in monthly installments over several years.

With how convenient personal loans are, it’s no surprise that they’re increasingly popular. According to TransUnion, Americans owed $253 billion in outstanding personal loans as of the end of 2024, up 42% from 2022. But as borrowing has surged, so has fraud. Consumers lost $12.5 billion to fraud in 2024 — an increase of 25% from the prior year — according to the Federal Trade Commission (FTC).

How do you protect yourself against personal loan scams? Scammers tend to use the same patterns, so learning about common red flags can help you separate fraudsters from legitimate lenders and safeguard your money.

Personal loans are unsecured, so they don’t require collateral. Since there’s no appraisal process, lenders can process and approve applications faster than they can with secured loans. That speed is part of what makes personal loans so convenient, but it’s also why scammers target personal loan borrowers.

Finance scams have always been around, but there are a few reasons why personal loans are especially susceptible to grifters.

Fintech firms and online lenders make it easy

There are plenty of reputable online lenders and fintech firms, such as SoFi and LendingClub. But as borrowers get used to applying for loans and supplying personal information online, they’re more easily reached by scammers.

Criminals can set up fake — but incredibly convincing — websites that can seem like legitimate lenders. Once you submit your information, the scammer can steal your identity.

Some borrowers need a personal loan to cover emergencies, such as a vet bill, car repair, or a new major appliance. In urgent situations, it can be harder to carefully weigh all the options. Lenders that promise guaranteed approvals and rapid loan disbursements can seem like lifesavers in these instances.

That exact issue is why advance-fee scams are so prevalent. These scams require you to pay a fee up front with the promise of securing a loan for you. But, there is no loan; the “lender” just pockets your cash.

With the rise of AI and online tools, scammers can create realistic websites, emails, and chatbots. They can use those tools to mimic reputable lenders and trick borrowers into handing over their information or bank account details.

Not every scammer will follow the same process, but being aware of these red flags can help you spot a loan scam.

Personal loan application fees are uncommon but not completely unheard of. Some smaller lenders, particularly credit unions, may charge small application or processing fees, but it’s more common for lenders to charge origination fees that are deducted from the loan when the money is sent.

The key difference between legitimate fees and scam fees is transparency. Reputable lenders clearly explain that any fee is only for processing your application and does not guarantee loan approval.

Read more: What is an origination fee on a personal loan?

The old adage about “too good to be true” is especially accurate when it comes to finance. If a personal loan has much lower-than-usual rates, it could be a sign it’s not from a reputable lender.

As of September 2025, we found that personal loan rates ranged from about 6.5% to 35.99%. But according to the Federal Reserve, the average rate for a personal loan with a two-year term was 11.57%. If a lender offers a lower rate, especially if you have less-than-perfect credit, be wary of giving your details.

Trustworthy lenders will always list their mailing address, location of their headquarters, phone number, and email address. If you struggle to find their contact information — or can only contact the lender through chat or text — that’s a signal to look for another lender.

States require personal loan lenders to be registered or licensed. Even fintech or online lenders need licenses to issue loans in each state. To meet those requirements, they typically partner with banks holding licenses to issue the loans.

Reputable lenders will clearly list their partnership or state licensing information on the About Us sections of their websites or under the fine print at the bottom of the page. If you can’t find registration or licensing details, that could mean the lender isn’t following state laws.

When shopping for a personal loan lender, search for customer reviews on TrustPilot or the Better Business Bureau. If the reviews are overwhelmingly poor — or if there are no reviews at all — that’s a sign you should avoid that lender.

While any company can have some negative reviews, reputable companies should also have positive ones. If a company has no reviews, that could indicate it’s a brand-new company, which is common among scammers; they launch a new “company,” defraud customers, then close it and open a new one.

Scammers want your money, but they also want to make it difficult for you to get it back once you realize it’s a scam. As a result, they’ll ask for advance payment fees or processing fees via unusual methods. For example, they may request you pay them via cryptocurrency, gift card, or wire transfer.

With unsecured personal loans, any origination or processing fees are typically deducted from the loan amount when the money is sent to you. Any company asking for another form of payment — particularly in the form of cryptocurrency or gift cards — isn’t trustworthy.

Criminals make money by convincing you to make decisions before you have a chance to do any research or even think through your options. They’ll pressure you to act right away before you can second-guess the information they give you.

Any reputable lender will be fine with you taking a few days to consider your options, so if a lender pressures you to act fast, refuse to work with them.

Scammers are quick to adapt, and they can be incredibly convincing. If you’re the victim of a personal loan scam, take these steps to protect yourself and your money:

• Reach out to the police: File a police report with your local law enforcement department. You may need the report number when you dispute fraudulent charges on your accounts later.

• Contact bank, credit union, or credit card company: Reach out to your bank or credit union to notify them of the scam so they can be on alert for fraudulent activity. If you made a payment with a debit or credit card, notify the card issuer and dispute the charge.

• Freeze your credit: Contact the credit bureaus and freeze your credit if a scammer has your personal details. A credit freeze prevents scammers from opening credit cards or taking out loans in your name. It’s free, and you can do it online:

• File a report with the FTC: You can submit a fraud report to the FTC at ReportFraud.ftc.gov.

• Review your credit reports: Check your credit reports weekly at AnnualCreditReport.com. Look for any accounts that open under your name that you don’t recognize. If you spot any issues, dispute the fraudulent accounts with each of the credit bureaus.

Personal loans are effective tools for consolidating high-interest credit card debt or financing major purchases, but their speed and convenience also make them targets for scammers. As you shop for a personal loan lender, be aware of common red flags, such as high-pressure sales tactics, guaranteed approval promises, and better-than-usual rates.

To avoid scams, stick to reputable, well-known lenders. Our picks for the best personal loan lenders are a great starting point.

This article was edited by Alicia Hahn.