How to Avoid Loan Scams: Red Flags to Watch Out For

More and more people are looking for loans to help with everyday costs. While borrowing money can be a normal part of managing your finances, it’s important to be careful.

Here’s a simple guide to help you avoid loan scams, protect yourself, and help others do the same.

1. You’re offered a loan you didn’t ask for

If you get a message or phone call out of nowhere offering you a loan didn’t apply for, that’s a big warning sign.

Legitimate lenders don’t issue loans to people who haven’t applied. So if someone tells you you’ve been “pre-approved” and you didn’t even ask for a loan, be careful—it could be a scam.

2. They want you to pay upfront

A big warning sign of a loan scam is being asked to pay a fee before you get the money. It might be called a “processing fee” or “insurance,” but whatever the name, it’s not right.

If someone wants you to send money before they give you the loan, chances are you won’t get it, and won’t get your money back either.

3. It sounds too good to be true

While some lenders (like Finio Loans) may show you pre-approved offers based on your information, reputable lenders will still run checks - often soft searches - to make sure the loan is right for you.

Not sure if a loan offer is genuine? Take Five has some useful tips to keep you safe, check them out here.

4. They’re not registered with the FCA

In the UK, all lenders and loan brokers must be authorised by the Financial Conduct Authority (FCA). If they’re not, offering loans is against the law.

Always check the FCA Register to confirm a company is genuine. If the name, phone number, or address doesn’t match what’s listed, don’t trust it—it could be a scam.

5. They’re pushing you to act fast

Scammers love to rush you. They might say things like “this offer ends tonight” or “you need to pay now to lock in the deal.” That kind of pressure is a big warning sign.

Reputable lenders won’t try to scare you into making a quick decision. They’ll give you time to think it over, read the small print, and ask questions if you need to.

6. The contact details feel off

Some loan scams can look convincing at first, but the contact details often give them away.

Here’s what to look out for:

• Only a mobile number, no landline
• An email like @gmail.com or @yahoo.com instead of a proper official company address
• No office address, just a vague location or nothing at all
• Spelling mistakes or sentences that don’t make sense on their website

7. They ask you to pay in strange ways

Legitimate lenders don’t ask you to pay fees using:

• Gift cards
• Cryptocurrency (like Bitcoin)
• A bank transfer to someone’s personal account

These ways of paying are hard to trace, and once the money's gone, it's almost impossible to get it back.

Not sure? here’s what to do

Here are some simple steps you can take if something doesn’t feel right :

• Pause and take a breather. Step back for a moment. Talk it over with a friend or family member before making any decisions.
• Look into it. Search the company’s name online with words like “reviews” or “scam” to see what comes up. You might find warnings from others.
• Check the FCA Register. Make sure the lender is properly registered and allowed to offer loans in the UK.
• Stay up to date. Scam tactics change all the time. It’s a good idea to keep an eye on what fraudsters are up to. You can read the latest fraud trends from UK Finance.
• Check ScamSmart. The FCA also runs ScamSmart, a tool to see if an investment or loan offer could be suspicious.

What to do if you’ve been scammed

If you think you’ve come across a loan scam, don’t keep it to yourself. Reporting it can help stop others from getting caught out too.

• Contact your bank straight away – They might be able to stop the payment or get your money back, depending on how it was sent.
• Tell Action Fraud – This is the UK’s main place to report fraud. You can call them on 0300 123 2040 or go to actionfraud.police.uk.
• Report it to the FCA – If the lender isn’t registered or something feels off, you can report them directly on the Report a Scam page.
• Speak to Citizens Advice – They’ve got a simple guide on how to report a scam and can help you figure out what to do next. Visit Citizens Advice for support.
• Check your credit report – Scammers might try to take out more loans in your name. Use free tools like Experian or ClearScore to keep an eye on anything suspicious.
• Save everything – Keep any emails, texts, or screenshots. This could help later if you need to explain what happened or make a report.

Final thoughts

Spotting loan scams isn’t always easy—they’re meant to trick you. But now that you know what to watch for, you’re much better prepared to spot the warning signs before it’s too late.

Here’s a quick recap:

• Don’t trust unexpected loan offers.
• Never pay any fees upfront.
• Always check the lender on the FCA Register.
• Don’t let anyone rush you.
• Stay away from odd payment requests like gift cards or crypto.
• Ask questions and trust your gut feeling.

And most importantly—if something doesn’t feel right, slow down and double-check it.

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