Self Improvement Planet
Loan Fraud

How to Detect & Prevent Loan Fraud

Loan fraud occurs when your date is misrepresented during the loan process. It’s an illegal and criminal act that’s punishable by law. Unfortunately, loan fraud is quite common and can be tricky to identify at first.

Here are a few ways to detect loan fraud while applying for a loan.

The Lender Isn’t Registered

As per the regulations set by the Federal Trade Commission (FTC), all lenders must register themselves in the state(s) they operate in. One way to check whether your personal loan lender is legally registered is by looking at the cities or states listed on their website. If you don’t find this crucial bit of information on their page, there’s a good chance you’re dealing with a fraudulent lender.

Even if their website claims them to be a registered entity, it doesn’t hurt to double-check. You can reach out to your state attorney general’s office to confirm this piece of information. Lenders often claim that they’re not required to register in the state because they aren’t a US company or because all their transactions are done online. Do not fall for this. There’s a greater probability of them operating illegally or running a scam business than of their claims being true.

The Lender Lies about the Loan

Another telltale sign of loan fraud is when lender straight-up lies about the product they’re selling, i.e. the loan package.  For instance, they may explain the details of the loan in a way that contradicts what you’ve read about that particular product.


Alternatively, the fine print of the loan terms might include details or information you weren’t told about or were told differently. Some lenders may also conceal crucial bits of the loan terms from you that you’re unlikely to know of until after you’ve signed the documents.

A good and honest lender believes in transparency. Ask your lender all the details regarding the package you’re applying for and its terms & conditions. Cross-check this information to ensure you’re getting a reliable deal. You can also ask to see the loan application form beforehand and read the fine print. If you see even an ounce of dishonesty, trust your instincts.

The Lender Asks You to Lie on the Application

Everything about this act screams “fraud”. Lenders can be quite subtle about this, which is why they often get away with it too. If your lender is asking you to “alter” a few details on your application form and “suggests” you change the information you’ve provided, it’s a HUGE red flag.

Let’s say your credit score is pretty good. All you need to get your loan approved is have an income of a few hundred dollars more than what you’ve mentioned on the form. Your lender may casually mention how bumping up the figure can change things for you, implying that you should go ahead and misrepresent information on the application.

Never listen to suggestions like these. It can get you in some serious trouble if you get caught. Instead, report the lender for possible fraud.

A loan consultant can help you assess your loan offers, analyze its terms, and prevent you from falling victim to loan fraud. Jason D Koontz is a former bank Senior Vice President who provides loan consulting services. He’s also a real estate expert witness and a banking expert witness.

Get in touch with him today!


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