Consumer debt continues its rapid increase in the United States. A 2015 study by NerdWallet found that the average American household has over $15,000 in credit card debt and over $130,000 in total debt. This makes debt a huge problem in the U.S., and a major stress point for families who are facing it.
If you are among the many U.S. citizens who owe money, you can protect yourself from further financial strain by knowing your risk for fake loan and loan refinancing phone scams. Scammers promise quick fixes to individuals with poor credit history or debt, and they specifically target college students and recent grads with student loans, whose collective debt hovers around the $1 trillion mark according to the Federal Reserve.
These convincing, criminal callers can be hard to resist because they offer to alleviate your debt burden and lower your monthly payments. But ultimately, they're looking to add to it for their own gain via high interest rates, and even fake loans.
Fraudsters using number spoofing will often impersonate legitimate financial institutions, such as the Better Business Bureau, or federal agencies like the Department of Education. Depending on your situation, loan phone scams employ the following tactics:
If you have existing debt or poor credit history
Loan scammers will call offering to help you pay off debt or poor credit by guaranteeing you a loan. You're asked to pay a simple, advanced fee to submit your application and release the funds.
However after you pay up, they'll disappear - without following through on the loan offer.
If you have an existing loan or loans
Loan scam callers will offer you options to consolidate, promising to lower your interest fees or lend you money to eliminate your loan debt altogether.
They'll work to get you to disclose personal information, like your Social Security number or bank account number. Or, they might charge you processing fees for services you could get for free if obtained directly through a trusted financial advisor. In addition, if you agree to consolidate your loans under their terms they will consolidate them at a much higher interest rate, making your monthly payment on your loans increase substantially.
This tactic is one of the most common phone scams that target millennials. Many times the idea of paying only one school loan payment per month instead of multiple loans is very appealing, however it's important to know that federal student loans can only be consolidated via the Federal Student Aid site. (Typically there's no savings that result from this, though it does cut down on the amount of bills you have to keep track of.) Also, be aware that private and federal student loans cannot be consolidated together.
How to avoid loan phone scams
Regardless of the tactics that are employed, be wary of any unsolicited financial offers made over the phone. Tell-tale signs of a fraudulent offer include:
- The caller requests personal information.
- The caller guarantees you'll get a loan or loan assistance, no matter what your current situation is.
- The caller claims you've been pre-approved for a loan or loan assistance, but requires an up-front payment to cover insurance or processing "fees," often by wire transfer.
- The caller uses high-pressure techniques, claiming immediate action is required to take advantage of their offer.
If you receive any unsolicited calls with a loan or loan assistance offer, hang up immediately and report the occurrence to the FTC's Complaint Assistant.
You can also check the legitimacy of a caller by verifying if the stated company exists with the Attorney General in your state. Lenders and loan brokers are required to register in the states where they do business.