Skip to main content

Loan scams are very common and will often impact people who are vulnerable and looking for loans. If you let your guard down, you can find yourself giving sensitive information to a scammer or falling for a trap but not receiving the loan as promised.

With this in mind, Capital Bean aims to share some things to look out for if you suspect something could be a loan scam and how to protect yourself.


Key Points:

  • Loan scams are most commonly aimed at the US’s oldest and youngest adults, who are the most vulnerable to these schemes. 
  • To protect yourself, you should only work with regulated lenders, 23,000 of which operate in the US. 
  • Licensed lenders follow state and federal laws. 
  • Common scams include advance fee loan scams and phishing scams. 


How Can I Tell if A Payday Lenders is Scamming Me?

One key giveaway is if you are being offered a lender in a state where payday loans are prohibited. 13 US states ban payday loans. These states are Arizona, Arkansas, Connecticut, Georgia, Maryland, Massachusetts, New Jersey, New York, North Carolina, Pennsylvania, Vermont, West Virginia, and the District of Columbia. 

If payday loans are not legal in your state but you have been offered a loan from a local lender, this is likely a scam and you should steer clear. Additionally, if you know your state caps how much you can borrow, but you are being offered a loan in excess of this, then you could be being swindled. For example, if you live in California, where loans are capped to borrow $300, but you are being offered an $1,000 loan, this is not legitimate. 

To check whether your prospective lender, or the lender who has contacted you, is legitimate, you can cross-check their details on the OLA website or SEC register and this will confirm their current status.

Other good practices include checking the company’s brand name for any reviews online, whether it is on social media, Trustpilot or generally on Google. If people have been scammed by them before, it is likely that they voice their dismay on the subject and this can be an important warning to future customers.

You could also check out scam-preventing websites such as to let you know if a website is a scam or not.


criminal scam

Criminals impersonate lenders or debt collectors to get their hands on what victims believe to be repayments


What Are Scam Debt Collectors?

Scam debt collectors have also been known to try and get their hands on money in bad faith. If you are approached by a debt collector and their demand doesn’t match up to your loan, they could be trying an elaborate scam. Similarly, if you haven’t taken out a loan, then debt collectors shouldn’t be trying to secure any money from you. 

If you did take out a payday loan, make sure that the collector is reputable and from the correct lender that you borrowed with. 


Recognizing Scammers

Part of being able to recognize when you are being targeted by a scam is knowing what scams and tactics to look out for. 

A common method for scammers follows a process like this:

The scammer gets in touch with you, via email, mail or telephone claiming to be a debt collector. The conman then demands a repayment, or says a previous payment didn’t go through. The scammer threatens legal action if you don’t transfer a payment, provide a bank account or credit card number to pay off the debt.

Remember, the scammer may have personal information about you, and could even know about a loan you applied for previously, but this does not make them legitimate!


sign contract

You should only sign a contract with a trusted lender, whose status you can check online


What Scams Should I Look Out For?

Advance Fee Loan Scams

Here, scammers will offer you a loan but demand money for “insurance” or to “demonstrate good faith,” They will typically require these payments to be made with a gift card or prepaid card— either by asking you to mail them your card, or more commonly to read your card details to them over the phone. There is the promise to offer a cash advance loan once you have paid them money upfront, however this should never be the case with any type of loan or financial product. It should be that you only receive funds once your loan is approved.


Phishing Scams

In these scams, someone tries to get you to reveal sensitive information in order to provide you a loan – however they plan to take this information to then take out a loan on your behalf, keeping the funds for themselves, so you become a victim of identity theft. 


What Should I Do If I Have Been Scammed or Suspect it is a Scammer?

If you have been scammed, this becomes a police matter so you can call 911 or report this to the Federal Trade Commission (FTC) who are the agency responsible for collecting spam reports. You can call them on 1-877-382-4357 or find out more information here:

By reporting the scam, the authorities can gather information and prosecute the victim if they find them – so expect to share more information with the authorities to help their case. In some events, the victims have been refunded after a lengthy proceeding, so it is impossible to get your money back and the perpetrator is sent to prison.

If you suspect it is a scam, but have not committed yet, you have a few options. Of course you can ignore it, which is always sensible, or better, you can report it again to the FTC and tell the individual scammer that you have reported them to the authorities or the police. It may cause them to stop or shut down some operations such as email addresses or phone numbers, which if anything is an inconvenience for them.



Richard Allan

Richard Allan

Richard Allan is the founder of Capital Bean and a passionate writer about personal finance, budgeting and how to save money at home and work.

Leave a Reply