Scamwatch: Christmas loan fraud

Online loan providers are not always what they seem...

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Stay one step ahead of the fraudsters with our series of articles giving you the lowdown on the scams they use to trick people out of their hard-earned cash - and how to avoid being taken in by them.

This week, online loan fraud, which picks up in the run up to Christmas as criminals target people seeking to cover the cost of the festive season.

How does it work?

December is a busy month for personal loan providers, with applications hitting a high as Britons borrow to fund their festive spending.

Loan companies are not the only ones to profit from more people seeking cash injections, though.

The fraudsters behind scams designed to trick loan customers out of money also step up their efforts at this time of year.

According to the City of London police, one of the most common types of loan scam involves cheap loans being offered in return for "advance fees".

Those who visit the bogus websites open themselves up to computer viruses, while those who send off fees in a bid to receive a short-term loan never see their money again.

How can I avoid being caught out?

Legitimate loan providers never ask for an "advance fee". So if the loan company you are considering borrowing from requests one, that should set alarm bells ringing straight away.

As well as avoiding companies that demand set-up fees, the City of London Police recommends researching loan companies online and taking the time to read the terms and conditions of the loan agreement carefully before signing up.

It also advises anyone offered a loan via a cold call to simply hang up as such offers are almost always scams.

I've been defrauded. What should I do?
If you think you have been caught out by a loan scam, the first thing to do is to contact your bank and warn it that you have shared your account details with fraudsters.

It is also worth checking that the website has not infected your computer with a virus (use an online virus scanner such as the Microsoft Safety Scanner) and reporting the fraud to Action Fraud on 0300 123 2040.

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