Seniors: Do You Recognize the Signs of a Loan Scam?

It wasn't that long ago that the only way to secure a personal loan was to visit your local bank and fill out an application. Sure, you can still land a loan through your bank or credit union, but there are now other players in the game, including scam artists, intent on cashing in on your Social Security benefits and the money you've worked so hard to put away for retirement.

Some of the scams are deceptively simple, while others are more complex. The goal is to arm yourself with enough information to be prepared when scammers come calling.

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Red flags

Although scammers frequently change their techniques to throw victims off the scent, scamming is nothing new. It's a lazy person's way of separating you from your savings. While scammers will do their thing, you can protect yourself by knowing what to look for. Here are some of the red flags that should get your antennae up.

• Offers that appear to be too good to be true
• Upfront fees
• Unsecured websites
• No physical address or verifiable contact information
• Promises of no credit check
• High-pressure tactics to hurry you into a decision
• No physical documentation, like a loan agreement
• Ambiguous or confusing loan terms

Here are some examples of common personal loan scams.

Phishing scams

The next time you receive an unsolicited email that appears to be from a legitimate lender, be wary. Scammers have figured out how to make their emails look legitimate and may even include links to fake websites that you could swear belonged to a legitimate financial institution. They use these sites to gather your personal information, like your Social Security number. Once they have your personal information, they can steal your identity and take out loans in your name.

Let's say an email arrives from a bank you know and trust. Don't assume it's actually from the bank. Instead, call the bank directly and ask a representative to confirm that it's from that bank. Don't use the phone number included in the email, but look up the bank's actual number.

Fake loan brokers

Some scammers have perfected the art of posing as loan brokers who claim they can help you find a loan. Chances are, if you fall for it, you'll pay a fee for the service, and the scammer will move on without ever connecting you to a legitimate lender.

This scam can be particularly appealing if your credit score is low and you need a loan. As with the phishing scam, the fake loan broker may link you to an official-looking site, complete with (totally fake) "testimonials" from happy customers.

Tax refund anticipation loans

According to the New York Department of Financial Services, tax refund anticipation loans can also be a scammer's way of edging their way into your personal finances. Some tax preparers offer what they refer to as fast money, instant, or express refunds. These refunds are loans borrowed against your expected refund amount and often include extremely high interest rates and fees. Moreover, even if you don't receive your refund or the refund is smaller than anticipated, you must repay the loan.

There are several ways to avoid falling prey to one of these anticipation loans:

• Contact AARP Tax-Aide. Tax-Aide helps low-to-middle income taxpayers with taxes and refunds, paying special attention to those 50 and older. You can locate the nearest AARP Tax-Aide site by calling 888-227-7669.

• Visit a Volunteer Income Tax Assistance (VITA) site at a nearby community center or your local library. Both VITA and the Tax Counseling for the Elderly (TCE) programs offer free tax help for taxpayers who qualify.
• File your return electronically and have the refund deposited directly into your bank account. Filing electronically speeds up your refund and reduces the temptation to borrow against the money.

Government grant and loan scam

You may hear about a government grant or loan via the internet, phone, social media, or newspaper. This scam involves a company claiming to "guarantee" a grant or loan from the U.S. government. All you have to do is pay a fee. Typically, they'll instruct you to send the money overnight, through courier services, or by wire. Once the money is sent, you'll never hear from the scammers again.

Home equity line of credit scam

Even if you're not rolling in the dough with millions in your retirement plan, scammers will come after you for your home. Home equity -- the value of your home minus how much you still owe -- allows you to borrow money from a lender by using that equity as collateral. The scam occurs when someone talks you into borrowing more than you need or charges a higher interest rate and fees than you can afford. The scammers hope you won't be able to keep up with the payments, and since your home is collateral, they can take it.

While an easy loan may sound appealing, your best bet is always to do your homework to ensure the lender is who it says it is. Anything less could lead to losing money.

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