Paying for Your Loan? Think Again

This week, I want to tell you about yet another scam that is always widespread but is likely to grow during tight economic times: the advance-fee loan.

If somebody tells you they can guarantee you a loan if you pay a hefty fee upfront, that is the hallmark of an advance-fee loan scam. The fee usually ranges from $50 to $500. You shouldn't have to pay money to get money. This is not to be confused with things like small credit-report fees you pay upfront when you apply for a mortgage. The key difference is that you are not being guaranteed the mortgage. It is illegal to guarantee somebody a loan in exchange for a fee.

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The Federal Trade Commission, the nation's consumer watchdog, just took action against telemarketers who targeted people with poor credit and then pulled an advance-fee loan ploy.

The FTC says the defendants charged up to $250 and claimed the consumers would get a credit card with a large limit, despite their terrible credit. They also promised to report their use of the card to the credit bureaus to help them re-establish their credit. The FTC says it was all a lie. Consumers who paid the fee did not get a credit card. They got an online shopping card that could only be used at the defendants' Web sites and was useless for establishing credit.

Advance-fee loan scams are also one of the most common schemes reported to the Better Business Bureau. They never go away. So it's up to you to stay away. Here are some more characteristics to help you identify them.

"No money? No job? No problem!" This is the classic, seductive sales pitch of an advance-fee loan scam. The ads appear in the newspaper, on telephone poles and on the Internet. Telemarketers also hawk advance-fee loans. Don't fall for it. You'll give up your money and you'll get ... nothing. The bad guys have no intention of giving you a loan or a credit card.

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