High Interest Loans for Bad Credit
At our DebtCare Canada offices last week, we had two different clients showing us loans they had taken where the companies giving them these loans should go to jail. When people are stuck in a situation when they have no choice to take on a loan with an extremely high rate of interest is simply preying on someone who is without options.
The laws in Canada states a lender cannot charge more than a 60% annual interest rate. This would simply be a case of loan sharking. One client was in a contract paying 58.9% annual interest, on top of administration fees and charges. He had paid close to $8,000 of interest on a $15,000 loan. Companies offering services like these should be shut down.
Another client had taken a second mortgage on her home for $50,000 and the interest payments alone giving no reduction to principle was over $9,000 per year. When a pensioner takes on a loan like this they never pay it off and are simply losing any equity they have built up in their home over their lifetime.
In both cases, I wished we had consulted with these clients prior to taking these loans. Better late than never I suppose.
Here are some warning signs of fraudulent loan companies looking to take advantage of people.
Bad Credit Loans – Tips on How to Spot Scams
One of the fastest growing scams in North America is the “bad credit loan” scam. In these scams a legitimate appearing financial company offers individuals with bad credit history a loan, often these loans are “guaranteed” regardless of the client’s credit history, even if they have a bad credit or no credit they will get the loan. All they will have to do is pay an upfront “security deposit” for the loan because of their bad credit history, the problem is that the loan will never arrive and the security deposit will be lost.
Consumers who have lost their jobs are left with bills to pay and have no access to credit, in desperation they turn to alternative ways for credit. Many feel relieved when they find “financial companies” who give them a loan with “bad credit history” or “regardless of past credit history” the excitement quickly turns into frustration when they come to realize that they have been a victim of fraud and will not only not get the loan they were promised, but have also lost their “fee” or “security deposit”.
Sometimes it can be hard to detect these companies, here are some tips to help you differentiate between legitimate financial companies and fraudsters.
Tips To Detect Loan Fraud
- The company asks for an upfront payment. This payment can be disguised as a premium, insurance, collateral payments or a security deposit. It is ILLEGAL to ask for upfront payment for a loan in US and Canada.
- Don’t give out your personal or financial information over the phone or the Internet unless you’re familiar with the company. This includes bank account information, SIN, date of birth, etc. This information could also be used for Identity Theft.
- Legitimate lenders never guarantee or say that you will receive a loan before you apply, or before they have checked out your credit status or contacted your references, especially if you have bad credit or no credit record.
- Do your Research! Type the name of the company into a search engine along with the word scam. The results may reveal a history you didn’t expect. Try to visit their office, if it is local.
- Verify the company – Get the company’s number in the phone book or from directory assistance, and call it to make sure you’re dealing with the company you think you are. Check with the Better Business Bureau to see the company’s record.
What If Fallen Victim to Bad Loan Scams?
- In Canada, call Project Phonebusters in Canada toll-free at 1-888-495-8501.
- In Canada you can also call the Competition Bureau at 1-800-348-5358.
- Contact local Policy as well as Federal Policy (RCMP and FBI)
- File a complaint at ICCC and FTC