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Loan fraud

How to Avoid Loan Fraud

Every year, thousands of people in the US unwittingly fall victim to the dishonest practices of unscrupulous lenders and loan fraud. Unfortunately, the majority of victims tend to be the more vulnerable members of society including inexperienced first-time home buyers as well as the old.

Here are some suggestions to help you from becoming a victim of loan fraud:

  • Whatever loan you are looking to take on, make sure you put aside sufficient time to carry out research and shop around. Make thorough comparisons using the information provided by the various lenders. Weigh up the key advantages and disadvantages and consider all the factors such as length of loan, interest rates, and penalties before making your final decision.

  • Do not choose a lender who puts pressure on you to take on a loan by telling you that you will not be offered another loan elsewhere, or else you'll be setting yourself up for potential loan fraud.

  • Never put your signature to a loan contract or document that has suspicious blank spaces or that contains untrue or inaccurate information, common in loan fraud.

  • Some corrupt lenders will deliberately make alterations to the final agreement. Before signing your contract, check again that the terms and conditions are what you originally agreed to.

  • Never choose to work with a lender who persuades you to lie about your income, employment status, expenses, or the deposit available for down payments in order to get a loan.

  • Watch out for higher-risk loans such as balloon loans, certain interest-only deals, some bad credit loans, and loans with exorbitant pre-payment penalties. If something looks too good to be true, it probably is, and is likely a form of loan fraud. Try to stay away from such packages.

  • If you find yourself in vulnerable circumstances such as being unexpectedly unemployed through redundancy or illness, be careful about disclosing this type of information as there may be loan sharks out there who are ready to take advantage of your misfortune.

  • Think carefully before deciding to refinance your property time and again; this could eventually lead to you losing your most valuable asset, your home.

  • Beware of unprincipled loan providers who give false appraisals.

  • Do not let any loan provider convince you to borrow more money than you can afford to repay. Be sensible as you are the one taking the risk, not the lender. If you fall behind on your payments, you risk losing everything including your home.

  • Always obtain several quotes from multiple lenders so you know you are being charged a fair interest rate based on your credit history, not on other factors like race or religion.

  • A lot of loan fraud takes place in the form of exorbitant advance fees. If your lender is demanding a large fee upfront, you should avoid this loan provider instantly.

Mortgage Loan Fraud

Of course, mortgages remain the main reason for people in the US to borrow huge sums of money. In order to own their dream home, more people are now prepared to lie about their earnings. Sometimes, borrowers use self-certification mortgages, which are strictly for self-employed applicants but are increasingly used by others, to secure a larger mortgage than they can afford.  

It can be argued that sub-prime mortgages are a form of mortgage loan fraud committed by mortgage lenders. As the global credit crunch has now painfully shown, these unscrupulous lenders have not acted responsibly in giving out sub-prime mortgages to those who cannot maintain their repayments in the long term.

Loan Fraud and Identity Theft

Identity theft is the fastest-growing crime in the US. Identity thieves steal other people’s personal and financial details to apply for loans and other types of credit.

 To help you avoid loan fraud through identity theft, you should ensure the following:

  • Destroy any unwanted bills, receipts, statements, and even junk mail using a shredder.

  • Keep your login details secret.

  • Keep your credit cards and PIN numbers safe.

  • Beware of onlookers when entering using a cash machine or paying by PIN.

  • Do not use passwords which are easy to guess.

  • Make sure that your credit file is up to date and accurate. Look for any unusual activity.

  • Be cautious with new transactions. Make sure that you are dealing with a legitimate company before handing over any account details.

  • Keep important documents secure such as your birth/marriage certificates, driving licence and passport, but ideally not all in the same place.

If you follow these tips, you should be able to protect yourself against loan fraud and other credit scams.

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