What to Look Out For to Prevent Online Loan Scams

Illegal money lenders can easily set up online scams. All they need is a website and a phone address to get their business up and running.

While it can be difficult to tell the difference between a licensed money lender and a loan shark, there are some telltale signs you can look for to avoid being duped.

Here are a few things to keep an eye out for.

1. Remote Loan Application And Disbursement

As more licensed money lenders go digital, online loan applications are becoming more common.

There are licensed money lenders with an online presence who provide services that can be applied for online.

However, the rise in remote applications provides an opportunity for unlicensed money lenders to defraud others.

Before disbursing your loan, a licensed Singapore moneylender will conduct a face-to-face verification. Unlicensed money lenders, on the other hand, may approve your application via email, SMS, or phone call without any contract. There may be no face-to-face meeting, and your loan may be disbursed directly to you.

As a result, be cautious and avoid falling victim to these types of scams. Check to see if the licensed money lender you're dealing with is licensed. Check that the lender has a proper business address and application procedure.

If you are not required to go to a physical location to sign a detailed loan contract, this is a huge red flag and a sign that you should cut all contact immediately.

2. Interest Rates and Fees

Before your loan is processed, an unlicensed money lender or loan shark may request upfront fees, processing fees, or admin fees. They may even state that you must pay a fee before they can disburse your cash loan.

A licensed money lender will never ask you to transfer funds to them before making a loan payment. After your loan is approved, they will only charge a 10% admin fee, which will be deducted from your principal loan amount.

Aside from that, loan sharks or unlicensed money lenders charge interest rates that exceed 4% per month. They charge more to earn a large sum of money in a short period of time by using high interest rates.

The Ministry of Law in Singapore, on the other hand, regulates licensed money lenders. They are only permitted to charge a maximum of 4% per month for both nominal interest and late repayment interest.

Remember to double-check the interest rates you're being charged.

A licensed money lender in Singapore will provide you with the lowest interest rate.

3. Physical Locations

A physical address is required for a licensed money lender. You must visit their office for verification and to review the loan contract and terms.

As a result, if a money lender cannot provide you with an address, the money lender is most likely a loan shark.

You can also look up the official addresses of licensed money lenders on the Ministry of Law website.

5. Meaning of Advertising

Businesses that go digital also take advantage of the opportunity to keep up with trends. To entice people to borrow from them, they may use tactics such as SMS, WhatsApp, flyers, and emails. These are violations of advertising rules for licensed money lenders. As a result, block and report the number immediately.