Loan scams… we all know they exist, but if you arm yourself with the right information, you can avoid becoming the victim of a loan scam.

Loans scam types

It’s a good idea to understand the types of loan scams. Granted, some of the loans I’m going to list below are not scams necessarily, but they are not what I would consider worthwhile loan products.

Loan scams - Bogus Lenders

Here are a few of the loan scams bogus lenders will try to utilize:

1. Equity stripping - a lender gives you a home equity loan when you are not qualified. This could end up costing you your home since it is used as collateral for the loan.
2. Loan flipping - a lender encourages you to continue refinancing your home and all the fees keep getting rolled back into your home loan. Obviously, instead of saving you money, this will increase the amount you owe on your home.
3. Insurance packing - when insurance and other services are added onto your loan and the lender hopes that you will not notice. If you do, then they use scare tactics to get you to agree to the terms anyway.
4. Deceptive servicing - lenders add unnecessary fees, give inaccurate details, provide incomplete information, or add unnecessary “legal fees”. Bottom line, all those fees add up and you end up paying more than you should for your home.
5. Home improvement loan - this isn’t your typical home improvement loan. If you initiate the loan with a lender, that’s great. This type of loan only becomes an issue when a contractor you hire offers to arrange for financing, but in actuality, they are asking you to sign a home equity loan. Once you’ve signed the papers, they disappear. It’s better to initiate a home improvement loan with the bank yourself.
6. Signing over your deed - a lender offers to help you, but you must sign over your deed to get the help. This is only temporary, but what really happened is that they sell your home out from underneath you. Or, they tell you that you are now a tenant and demand rent or threaten eviction.

Remember, in any of these cases, you can rescind for any reason. You do not need to give an explanation. If you are using your primary home for the loan, then you have three days to change your mind. They can not deny you this and you will need to do it in writing, by the third business day at midnight.

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