3 Warning Signs Of A Dodgy Poor Credit Loan
Poor credit loans have never been more popular than they are right now with large numbers of people in the UK suffering from a bad credit history.
Unfortunately, this has led to some lenders taking advantage of people who are desperately in need of money to pay the bills or an emergency expense.
Here we identify some of the more common iffy practices, we have highlighted 3 of the most common warning signs to be aware of when looking for a poor credit loan.
Don’t leave your common sense behind
If regular personal loans from your bank or building society are out of your reach at the moment, it is crucial that you do not leave your common sense behind when looking for a loan.
Scams such as the letter through your door saying you’ve won a competition, then having to ring a premium rate number to claim the prize are easy to spot.
But some of the tactics used by the less ethical loan companies out there are a little sneakier.
One classic example of a dodgy loan was highlighted in the Guardian recently: ‘The payday lender that charged 16,734,509.4%‘.
OK, so 3 of the most common warning signs of ‘dodgy loan’ to be aware of:
1. Does the lender look legitimate with a Credit Consumer License?
All reputable lenders must be Authorised and regulated by the Financial Conduct Authority, having registered with the Information Commissioners Office and have a Consumer Credit Licence (CCL) Number. All this information should be easy to find out from their website.
Quite simply you should not deal with any company who does not have a CCL, for there are plenty of reputable lenders out there that do.
Have you been offered a loan by a lender who is prepared to skip the credit checking process? Credit checks are a crucial part of the application process for all quality lenders and if your lender is prepared to skip this, there is every chance that the loan you receive will come with an astronomical APR.
Deals that seem too good to be true are usually just that.
Click here for more on the Consumer Credit Register.
2. Does it sound too good to be true?
The unfortunate fact is, that for someone with a poor credit rating, the loans available will be more expensive than your typical ‘high street bank loan. Poor credit loans typically range from around 50% APR for guaranteed long term loans to up to 5000% APR for small short term loans.
So if a poor credit loan is being offered to you at a very low-interest rate, beware, there is every chance that something is not right.
This is a question that will often stand you in good stead throughout all walks of life, if something sounds too good to be true, it usually is.
There are a great number of legitimate lenders who will happily offer loans to people with a poor credit rating but there are always contingencies put in place to reduce the risk to the lender (i.e. guaranteed loans).
Follow these 5 tips for finding the right lender – https://www.nerdwallet.com/best/mortgages/tips-for-finding-best-mortgage-lender
3. Are you expected to pay upfront?
This one can be a little tricky and should always be approached with a slightly more open mind for the following reasons.
If you are using a credit broker to arrange your loan, you will be a charged a fee by the broker for the use of their services. If however, you have approached your lender directly, any up-front fees should be viewed with extreme caution.
Please note – Any additional payment should be considered to be ‘up-front’ right up until the moment the loan is credited to your account.
If you are asked for any up-front payment for any of the following reasons, the alarm bells should again begin to ring.
- Payment is needed up-front for loan insurance
- Initial up-front payment is required to activate the loan and verify your personal details
- Payment is required to allow a third party to set up a loan
These are all extremely unlikely to be true and will almost certainly lead to a loss of money.
Do you have a bad credit rating or need a loan quickly? Have you been asked to pay an upfront fee when applying for a loan or credit? Find out why this may be a scam and how to protect yourself in this article – Loan fee fraud.
Additional tips on avoiding dodgy or fake loans
The Citizens Advice Bureau have offered their top tips on fake loans:
- Never pay money upfront
- Never give out bank account details to cold callers
- Be very wary of cold calls offering loans, and internet sites offering quick and easy credit
- If it looks too good to be true, it usually is
- If you need credit, shop around, use a trusted source and always check the paperwork
- If you’ve already paid money upfront for a non-existent loan, inform Trading Standards (www.tradingstandards.uk). The Consumer Credit Act says that all but £5 of any brokerage fees should be refunded if no loan is taken up within 6 months.
For more information on how to avoid ‘dodgy’ or fake loans, take a look at the following Citizens Advice Bureau article – ‘Cold call credit cashing in on recession misery‘.
If you have a poor credit rating and are looking for a loan, we offer a range of great loans from the very best specialist lenders in the UK.
Non-homeowners are still eligible to apply for these loans, so long as you have a guarantor in place who will guarantee your repayments should you fall into difficulty.
Our process is very quick and simple; one simple application will go out to all our lenders and you will soon start to get loan offers.
Why not use our loan calculator to work out how much you can afford to borrow.