Don't Let a Loan Scam Ruin Your Business Hopes

Starting a business often requires at least a small amount of capital. Unless you have been able to plan ahead and save up a substantial amount of money, you will need a loan.

In some cases, you may be able to acquire a business loan, but more often you will ask for a personal loan to get your business off the ground.

Getting a Personal Loan

Because your business is new and doesn't already generate revenue, you may have to ask for a personal loan to get started.

This type of loan will be based off your personal history and credit rating. If you have good credit, you may find it easy to obtain such a loan from the bank.

However, if you have had credit problems in the past or cannot prove sufficient income to pay back the loan, you may have to resort to using other lenders.

You can easily find lenders for personal loans online.

Many times they can approve your loan request the same day or next business day, which is important if you have bills to pay.

Loan Scams

Unfortunately, there are also scammers who prey on people that cannot get a traditional loan.

They may use several methods to scam you out of money, some of which include:

• Asking for an advance fee before the fee is approved

• Emails sent from supposedly well-known lenders that request you to go to a specific site - also called phishing scams

Both of these issues can result in loss of private information and money.

How to Avoid Scams

It is possible to detect scams before you lose out on time and money.

As the article, How to Detect & Avoid Personal Loan Scams says, be alert to any lender that doesn't care about your credit history. Even lenders that are more lenient with past credit problems will want to do a credit check.

Some payday lenders do not require a credit check. However, they should also not ask for information such as your social security number.

Another tipoff is when the lender sends you blank documents to sign that don't state the terms upfront.

Never sign anything that doesn't spell out your obligations.

You should also look for an address or physical location.

While many online companies operate without a brick and mortar site, they should have a base location. One that doesn't provide this information is a company you can't trust.

Trust Must Be Earned

Do not trust a lender that guarantees you a loan before you even apply.

Legitimate companies will need to see your income and expenses to make a determination of how much you can borrow.

While some legitimate companies have shady practices, you want to avoid those lenders that do any of the above. Even if they are real companies that lend money, you may end up paying more than you can afford.

Instead, look for a lender that shows transparency.

Remember that if something sounds too good to be true, it probably is something you should avoid.