Most loan fraud can be easily prevented by the consumer. Virtually every case involves a relatively unknown bank or financial entity, which drew victims in with an offer too good to be true. If you stick to familiar banks making sensible offers, you’re not going to get ripped off.
– Try to do business with your bank. If you’ve done business with your bank for years, you know you can count on them not to rip you off. Sure, maybe you’ve had run-ins over fees and other charges, but you know they’re not going to clean out your entire bank account and run off with the money. And you know they’re not going to give you a loan for 7% interest and then run off with half the money, or take your monthly payments and pocket them instead of applying them to your balance before sending you to collections for the entire principal.
You know you can trust your bank, so if you need a mortgage or a car loan, why not go through your bank? You know you can count on them, and they’re fairly sure they can count on you (or they should you do pay your bills on time, right?).
– Try to do business with other known, reputable banks. If you don’t want to stick with your bank, look for attractive financing options from another major bank or a local credit union that your friends, family and colleagues bank with. If your loved ones can count on them, you can rest assured that you can count on those institutions as well not to rip you off. A major bank that advertises on TV and that many people you know business with also should be safe.
– If an offer sounds too good to be true, it probably is. This doesn’t just apply to fraudulent offers, but to loan offers with attractive introductory terms which balloon after a given time frame. In fact, mortgages with such terms, such as interest only loans and adjustable rate mortgages, keyed the housing and mortgage collapse that produced our recession: too many mortgage holders couldn’t afford to make payments once the terms ballooned and they were forced to default.
But for any loan offer, avoid if the terms sound far better than the terms most other banks and credit unions are offering. It’s possible the fine print balloons the interest and charges through the roof once the consumer is knee deep into that financing. Generally, however, the best way to avoid loan fraud is to deal with known, reputable banks. They won’t offer the most dazzling terms, but you can count on them to keep matters straight over the life of the loan.