What You Need to Know to Avoid Loan and Debt Relief Scams
Nobody sets out to get scammed. The fact that the people most vulnerable are those in the most need of help only serves to pour salt in the wound. There are scams all around you. We want you to be able to identify and avoid them. This guide should help with that.
Getting tricked by a scam doesn’t make you stupid. Everything is marketed in a way that makes it seem like it can solve your problems, that’s how marketing works. There is a general rule of thumb you can go by, however: Nobody is going to go out of their way to give you ‘free money.’ In fact, the very concept of free money should raise an immediate red flag. If something presents itself as a trick or an immediate answer to ALL of your problems, that’s another red flag. Beware of the over promise.
Scams are so successful at targeting people because most people don’t expect to be lied to. That’s why you should be wary of being approved for things you didn’t apply for. If something seems too good to be true, it probably is.
People in debt are probably scammer’s number one target. Whether it’s credit card debt or student loan debt, people who owe money are always looking for a way to improve their circumstances. Crawling out of debt is hard enough without vultures looking to take advantage of you.
You have to be especially discerning if you decide to take out a private loan. A popular scam is to offer potential debtors a lower interest rate, or faster loan forgiveness for an upfront fee. There’s a pretty huge flaw in the logic here, but people will still fall for it. Why would you pay money to borrow money!? If anyone offers you something like this, it is almost certainly a scam.
This scam is run on bogus scholarships as well. There’s no processing fee on a scholarship. They don’t need your banking information. These things may seem obvious, and for a lot of people, they are. These scammers are playing the odds. Most people won’t fall for it, but if they try it enough times, eventually someone will and that’s enough.
Third-Party Debt Relief
Third-party debt relief agencies are not scams in and of themselves, so long as they are actually doing something to help you get out of debt and not into more of it.
A third party debt relief company is an entity that will supposedly lower your monthly payments, offer earlier forgiveness, or nebulously make repayment easier some other way. It is an arena ripe for scammers. One scam is to offer you lower monthly payments, get you to give them third-party authorization, put your debt into forbearance, and just collect your checks. Meanwhile, you think you’re paying down your debt when really you’re just paying them for nothing. This is just one version of the “pay us, not them” scam. You should never have to pay more money for help in paying off a debt. Don’t pay more to pay less.
What You Can Do
Research, research, research, and more research. A lot of these scammers don’t even try to look legitimate beyond a basic initial facade. If you can’t find any information on the place, especially in the age of Yelp, strongly consider taking a pass. Scrutinize everything they say or do. It’s not hard to tell if something is made up these days.
If you’re trying to find relief for federal student loans, deal exclusively with federal institutions. Make sure they actually are federal institutions, scammers will try to pretend to be federal agencies, so watch out.
Don’t ever let someone try to pressure you into a decision. It is your money, not their’s. Debt is no fun, but don’t let your anxiousness to get out of it, get you into more of it!