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Personal Loan Scams to watch out for in Nigeria

Personal Loan Scams to watch out for in Nigeria

Recap

In this article, we address the prevalent issue of personal loan scams in Nigeria, offering insights on identifying and avoiding them. We emphasize the importance of using trusted platforms like Credit Nigeria for loan searches to avoid falling victim to these scams. The article categorizes various types of loan scams, including upfront fee scams, first contact scams, full guarantee scams, phishing scams, imposter scams, online lending scams, Ponzi schemes, and debt relief scams. We differentiate between predatory loans and scam loans, explaining that while both exploit borrowers, scam loans are outright deceptions with no actual loan offers. We provide guidance on spotting loan scams, such as avoiding lenders who contact you first, demanding upfront fees, or guaranteeing 100% approval.

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The demand for personal loans in Nigeria unfortunately means that fraudsters are always looking for ways to use personal loan schemes to cheat Nigerians out of their hard-earned money.

Personal loan scams are everywhere in Nigeria, and while this article fully explains how to avoid loan scams and the things to look out for, it is always best for prospective borrowers to use trusted platforms like Credit Nigeria for loan searches.

Credit Nigeria is an online platform that helps collate and compare personal loan options from reputable and legitimate lenders so you can choose the best for yourself; it saves time and energy and eliminated the worry prospective borrowers face from loan scams while applying for loans.

Types of loan scams

Fraudsters in Nigeria are evolving every day. Loan scam methods adapt and evolve as soon as the public is aware of the scheme. This does not however mean that the old scam methods cannot be utilized. The known loan scams include:

  • Upfront fee scam
  • First Contact scam
  • Full Guarantee scam
  • Phishing scam
  • Imposter scam
  • Online lending scam
  • Ponzi scam
  • Debt relief scam

Upfront fee scam

An upfront fee loan scam requires individuals and businesses to pay a fee before their loans can be approved. Individuals and businesses are promised juicy loan offers, usually loans with very low-interest rates, and all they have to do is pay a “processing”, “origination” or “insurance” fee.

Once this fee is paid, the loan never materializes and the scammer disappears with the money.

First Contact scam

A first-contact scam happens when individuals and businesses are contacted with loan offers without having applied for any loan.

No legitimate lender will contact you with loan offers without an initial application from you.

Full Guarantee scam

This kind of scam is when individuals and businesses are promised a 100% guarantee on their loan applications. It is usually used alongside the upfront fee scam.

The fraudsters demand a fee from unsuspecting victims with the promise of a 100% guarantee on their loan applications regardless of details like credit scores or income.

Phishing scam

This is when individuals and businesses provide personal and sensitive information to scammers under pretence.

These scammers contact the borrowers, claiming to be legitimate lenders, with promises of money and loan offers only if personal information is provided. They usually ask for bank account details and PINs to steal money from the victim’s bank account or commit identity theft.

Imposter scam

This loan scam involves fraudsters using sensitive information gained from individuals and businesses to apply for loans from other lenders.

Fraudsters use the information gained through online kinds of loan scams to open new credit lines and leave their victims in a huge amount of debt.

Online lending scam

This scam involves using fake websites to gain information or money from unsuspecting individuals and businesses.

Fraudsters use a fake website or online platform to offer, but the scammer is just looking to either get funds or gain access to personal information (such as bank account or credit card details). This information is eventually used to steal money from the victim’s bank account.

Ponzi scam

This loan scam happens when individuals and businesses are promised high returns on a loan investment. The returns are however paid to old investors using money from new investors.

This system is never sustainable and it eventually collapses with the scammer disappearing with all the money gathered leaving investors with nothing.

Debt relief scam

This kind of scam involves fraudsters promising to help individuals and businesses relieve their heavy debts. The fraudsters claim to be able to pay off these debts in return for fees.

Once these fees are paid, the scammers disappear, leaving the unsuspecting victims with even more debt.

Predatory Loans vs Scam Loans

These two kinds of financial scams are not the same. Even though they are the most common in Nigeria, and are both designed to take advantage of unsuspecting borrowers, there are major differences that set them apart.

Predatory loans are offered by lenders who seek to take advantage of borrowers with little or no financial intelligence. These loans are offered at high-interest rates, accompanied by hidden fees and other unfavourable terms.

Predatory loans often prey on lower-class individuals in terrible financial situations. These financial situations make it difficult (but not impossible) for individuals to receive loans from legitimate lenders or banks.

So predatory loans entice desperate individuals to accept the loan. Once accepted, they might spend the rest of their lives paying off the loan because of the absurd interest rates and fees.

Scam loans, on the other hand, do not involve loans at all. The fraudsters pretend to have juicy loan offers for borrowers under many guises to either gain funds from the borrowers or gain access to their information to use for other fraudulent purposes.

Scam loans use fake websites, names, and social media profiles, to get personal information and/or money from unsuspecting individuals. Once the borrower pays the fee and provides the information, the scammer disappears.

How to spot a loan scam in Nigeria

As a general rule, lenders and credit providers have a standard business model of providing loans to individuals who seek them. So any lender that contacts you first for a loan offer is most definitely a scam.

Any lender that requires you to pay an upfront fee before the loan can be approved is also a scam. Some lenders may ask for fees, but these usually come after your loan has been approved and not before; scam loans ask for upfront fees before approvals, while legitimate loans include the fees with the package.

Any lender that pressures you to act quickly is also a scam as legitimate lenders allow you to take time and decide if the loan is the right fit for you by checking out the terms and conditions.

Legitimate lenders in Nigeria will only ask you for information that is necessary to process a loan. These include:

  • Your name
  • Your occupation
  • Bank Verification Number (BVN)
  • Address and date of birth

Generally, information just to confirm that you are who you say you are. Legitimate lenders will never ask you for sensitive information like:

  • Your PIN to your ATM card
  • Your bank account details before you applied for the loan

Any lender that does not have a physical location or contact information is a scam. It is generally advisable to stay clear of sketchy lenders that cannot provide these and only contact you through phone calls or with a private number. Most scam loan lenders don’t have physical or contact information to make it easier for them to disappear after they have completed the scam.

Any lender that guarantees you a 100% approval rate is a scam. This is because loan decisions are always made on an independent basis with the information available. It is always also best to stay away from lenders with unclear terms and conditions.

If the loan offer is too good to be true, it probably is a scheme to defraud you.

Loan scam red flags

These red flags will never lead you astray as they most likely will save you from a loan scam.

This is because scammers can rarely hide their urge to want to cheat in Nigeria. They’re almost always so desperate to cheat individuals and businesses that they don’t bother trying to be careful.

You should be alarmed if a lender:

  • Has no interest in credit history
  • No physical address
  • The lender isn’t registered
  • Guarantees you a 100% approval rate
  • Has no reviews online, especially on sites like Nairaland
  • Requires an upfront fee before approving the loan
  • Uses unclear or fake-looking names
  • No emphasis on repayment
  • Uses Bad grammar in terms and conditions, or on their “website” or anywhere
  • Has strange requirements or methods of payment
  • Excessively tries to pressure you into taking the loan as fast as possible

What to do when caught in a loan scam in Nigeria

The first thing you need to always keep at the back of your mind is that loan scams are after money. This might seem like it’s very obvious, but it usually isn’t.

Loan scams aren’t just after your money, they’re after money and they are not always looking to get your money. Sometimes, all they need is your information.

In light of this, you must:

  • Immediately stop communication with the scammers when you realize your situation (block them on all platforms)
  • Do not send the scammers any funds (or stop sending if you had already started to send)
  • Regularly check your bank accounts for any changes made by you

You can then take the appropriate steps to ensure that your information cannot be used in any malicious way.

A good way to do this is to go to your nearest bank branch to report the scam or that your information has been compromised as soon as possible. The bank will most likely reach out to the Economic and Financial Crimes Commission (EFCC) and the Central Bank of Nigeria (CBN) on your behalf.

You can contact any credit bureau in Nigeria to place a fraud alert on your credit report. This will notify all creditors of the information leak, and it’ll keep the scammers from using your information to open new accounts to lend money in your name.

How to get loans without being scammed In Nigeria

Credit Nigeria is one of the very few surefire ways to get loans without being scammed in Nigeria.

Individuals and businesses never have to worry about loan scams or be on the lookout for red flags while using Credit Nigeria as the platform only deals with widely respected lenders.

These lenders are regulated by the Central Bank of Nigeria (CBN) and are insured by the Nigeria Deposit Insurance Corporation (NDIC).

This corporation is an independent agency of the Federal Government of Nigeria that protects depositors and guarantees the settlement of insured funds when a deposit-taking financial institution can no longer repay deposits; in other words, you will always be covered with NDIC-insured companies.

Frequently Asked Questions

Are scam loans the same as predatory loans?

No. Scam loans and predatory loans are not the same although they both cheat borrowers. While scam loans set out to cheat borrowers through blatant deception by pretending there’s a loan offer, while there’s not; predatory loans are more subtle as they involve loan offers but cheat unsuspecting customers with unlawfully high-interest rates and hidden fees.

Are online loans legitimate?

Credit Nigeria is an online completing tool that gets you loan options from only reputable and legitimate lenders. You don’t have to worry about who is fake or real with Credit Nigeria.

Should I trust a loan offer through email?

The answer to this entirely depends on timing. If a lender contacts you first through email offering you a loan, without you seeking to get a loan from them, always decline, and block the lender’s email; do not disclose anything to them. This is because it is 100% a scam as no legitimate lender would contact you first with a loan offer you didn’t request for. If you have requested a loan from a lender, however, and you get a loan offer (including terms and conditions of the loan) sent through your email, you can consider the offer as most online lenders send offers and terms and conditions through emails. This does not mean to automatically trust the offer though, as it is always better to do due diligence on every loan offer.

Can a bank scam me?

It is highly unlikely, although very possible, that you will be scammed on a loan by a bank. Banks are the safest credit institutions in Nigeria for loans with or without collateral. It is possible that fraudsters would try and assume the identity of a bank to scam you with loan offers. This is why it is always good to do your due diligence and to always be on the lookout for red flags.

What are the known loan scam applications in Nigeria?

Loan scams are on the rise in Nigeria, and fraudsters come up with different ways every day to cheat unsuspecting victims out of their hard-earned cash through false promises of digital lending. Some of the already-known lending apps use online loan apps to rip off Nigerians applications. They include:

  • Sokoloan
  • Okash
  • NairaPlus
  • Easy Moni
  • Easy Credit

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