Hints: Watch Out for Aggressive Sales Pitches, Upfront Fees and Guaranteed Money.

When you are strike with an urgent financial crisis, looking for a quick fix could lead you to a bigger problem: loan scams. When the Covid-19 pandemic hit, scammers and fraudsters took advantage of people’s desperation, confusion, and anxiety and came up with various sophisticated schemes to hook the unsuspecting borrowers into a loan scam that seems too good to be true.

In 2020 alone, Bukit Aman Commercial Crime Investigation Department (CCID) received a staggering 5,718 cases involving non-existent loan fraud involving losses of over RM62 million; as of May 18, 2021, a total of 1,987 cases of non-existent loan fraud were reported with losses totalling RM20.2 million.

Fraud and scams not only affect people emotionally and mentally; the one that purports to be a loan could cost you hundreds or thousands of dollars and possibly expose you to identity theft. But if you understand what they are and how they work, you are much less likely to fall victim to them. Here are some of the ways to spot loan scams and what you can do about them.


What Is a Loan Scam?

Loan scams do not result in a loan. The money you are promised to receive never materialises, and they are often a crime.

The modus operandi of scammers usually involved them claiming to be staff from a licensed moneylender by sending loan offering services via SMSes or WhatsApp messages to random users. Interested parties are then instructed to transfer money as a deposit before the loan can be disbursed. After making the transfer, victims find that the scammers are no longer contactable.


What Are Warning Signs of Loan Scam?

Here are some red flags a loan might be a scam:

1. Asking For Money Upfront

If you are asked to pay upfront fees for the right to receive the loan, you should be alarmed. You will definitely have to honour your loan agreement and make the regular repayments as agreed as well as the associated fees – such as the application and credit report fees. Scammers will often for an upfront payment because they don’t intend to give you a loan. Legitimate lenders will charge you a fee after your loan has been approved, not before.


2. No Interest in Your Credit History

Any licensed and legal money lenders would like to establish a borrower’s creditworthiness before extending a loan offer. They usually want to run a background check and confirm your credit history. This helps them to assess what kind of borrower you will be and whether you are a reliable borrower or not. Only scammers are happy to grant you a “guaranteed approval loan” with you not having a good credit score or any credit history.


3. SMS or Cold Calling or Online Advertisement Offering Loans

Just to clarify, not every offer that you receive through these channels is a scam. Some of them are actually from legitimate sources like banks and licensed money lenders.

Therefore, if you came across this type of offering, the first thing to do is to perform due diligence. Start by checking the legitimacy of the source by going through their website and social media platforms. Next, examine carefully what they are offering. Be on high alert when the loan credit limit is higher or the interest rate is lower than anything else you’ve seen, if it sounds too good to be true it usually is.


4. Pressure To Make Quick Decisions

Beware of lenders that keep pressuring you to make a decision immediately by stating their offer will expire soon. Taking a loan is by no mean a small decision, trustworthy and legitimate lenders will give you sufficient time to review the terms and rates of the loan offer.


5. Unrealistic Loan Offers

Scammers always claim they can offer loans with interest rates that no other lending companies can. Look out for red flags such as guaranteed approval rate or interest rate that’s too low. There’s no such thing as ‘0% interest rate’ or ‘100% approval’ loan offers.


How To Spot a Trustworthy Lending Company?

These are some ways to determine the legitimacy of a lender.

1. The Loan Offer from The Lender Makes Sense

A trustworthy lender won’t offer you a loan you can’t afford. They will check your credit history, income, and employment so they can approve you for an amount you’re likely to pay back.


2. The Lender is Accredited by The Ministry of the Housingand Local Government
 

To be accredited by the Ministry of the Housing and Local Government, a company has to undergo a rigorous evaluation. If a lender is accredited, you can rest assured that they’re operating in a trustworthy manner.


3. Perform Research on The Lending Company

Check the name of the company itself, along with the company’s license number, public phone number, and physical address. Be alert to anything that doesn’t seem to match.


What To Do If You’ve Been Scammed?

In case you have become a victim of a loan scam, don’t panic. Here are some actions you can take:

1. Lodge A Police Report As Soon As Possible

Report the crime to your local police department. While it’s not likely you’ll get your money back, you could help authorities track down the scammer if you have contact information.


2. Keep All Records and Documentations

Keep all records and documentations for the transaction such as bank-in slips, deposit slips or agreements, vouchers that you received from the perpetrator so that you can use the documents to take action against the scammer.


3. File A Report with Bank Negara Malaysia

Bank Negara Malaysia keeps an eye out for any illegal financial schemes that might try to exploit people. You can file a report with them here


4. Contact a financial advisor
  

When you fell victim to a loan scam and lost a huge sum of money as a result, seek professional help such as Credit Counselling and Debt Management Agency (AKPK) that provides free credit consultation services to individuals. As mentioned earlier, it is likely that it would be difficult to get back your money from the scammer, so the next best thing you can do is to take proactive action to recover financially.

Avex Venture Capital is a licensed money lender in Malaysia under the purview of Ministry of Housing and Local Government, and governed through Money Lenders Act 1951 and Money Lenders Act (Amended) 2003. We provide a variety of personal and business loans that are tailored to meet your specific needs.

Apply for funding and find out if you qualify today.