Warning Signs of a Bad Lender
Multiple complaints on Internet scam boards
Any company doing enough business is bound to draw complaints. But lenders – especially alternative lenders who don’t have to answer to a regulator – should be treated with caution when a complaint on sites such as RipOffReport.com, the Better Business Bureau or Complaints.com are recent, repeated and plausible. Maybe it’s just one angry former customer, or someone with unreasonable expectations, or an online shakedown artist. But check the boards anyway, and pay attention to the tone of the complaint.
A lender comes from nowhere with a deal in hand
Lenders say they’re beating potential customers away with sticks. While it might seem a little shady, the fact is that most finance-providing businesses cold-call from time to time. That’s not to say that all of them have great offers for you. The safest thing to do is to get a contact number for the salesperson, research their offer and, if you like it, call them back to do business with them. Sure, the call may be the tip of a scam, but it only takes a small amount of diligence on your part to figure that out. Something to raise your suspicion is if a financing company makes ….
A request for a big fee up front
This is the classic advance fee scam, perfected by nameless spammers from sub-Saharan Africa. A lender will offer an oversized loan at an attractive rate of interest and quick closure. All that is necessary is a nominal fee to cover administrative costs — $1000, $5000, or in one case noted on RipOffReport, $300,000. The check gets cashed (or the wire transfer completes), and then … silence.
Terms “to be discussed later”
You should negotiate all your terms up front. Forms that have blanks or contain untrue information that the lender’s people “will fix later” are a serious problem. A legitimate lender will want you to be completely honest. Being asked to lie on forms or to other people about your assets, the appraisal of your property or your financial condition exposes you to potential fraud liability.