Avoid Loan Scams: Spot Red Flags Before It’s Too Late

In Malaysia, online scams have reached alarming levels, with over 95,800 victims losing a staggering RM3.18 billion (approximately USD 700 million) between 2021 and April 2024. 

These scams are becoming increasingly sophisticated, preying on individuals seeking financial assistance.

The Rising Threat of Loan Scams in Malaysia

Loan scams are a prevalent issue in Malaysia, with scammers posing as legitimate lenders to exploit those in financial need. They often lure victims with promises of quick approvals and favourable terms, only to disappear after collecting upfront fees or personal information. The consequences are severe, leading to significant financial losses, identity theft, and emotional distress.

Real-Life Horror Stories

• Couple trapped in loan scam: A married couple responding to an online loan advertisement threatened with RM10,000 repayment over an unwanted RM1,200 loan. (source: New Straits Times)

• Woman Coerced into RM100 Loan Faces RM2,900 Repayment Demand: In Kuching, a woman was forced by loan sharks into accepting a RM100 loan. Despite attempting to back out, she was harassed to repay RM2,900. (source: The Rakyat Post)

Protect Yourself: Recognize the Red Flags

To safeguard against loan scams, be vigilant for the following warning signs:

1. Upfront Fees: Legitimate lenders deduct fees from the loan amount or charge them after disbursement. Scammers demand payment upfront, labeling it as a "processing fee" or "insurance."

   Action: Never pay fees before receiving the loan. Research the lender’s fee policies and verify through trusted sources.

   
   

2. Unlicensed Lenders: Scammers often operate without proper authorization. Legitimate lenders are licensed by Bank Negara Malaysia (BNM).

   Action: Check the lender’s licensing status on BNM’s Financial Consumer Alert List. 

   
   

3. Guaranteed Approval: No legitimate lender guarantees loan approval without assessing your creditworthiness. Here are some of the ways they lure you into contacting them:

   • "Bad credit? No problem!"

   • "100% guaranteed approval!"

   • "CTOS? Blacklist? Semua boleh kaotim"

   Action: Be cautious of offers that seem too good to be true. Trust lenders who require financial details before approval.

   
   

4. Insecure Communication Channels: Scammers may use unofficial email addresses or communicate via social media, avoiding professional channels.

   Action:

   • Ensure the lender uses secure websites (look for "https" in the URL).

   • Verify their contact information and physical address.

     
     

5. Pressure Tactics and Urgency: Scammers create a false sense of urgency to prevent due diligence.

   Action: Take time to review loan terms and research the lender thoroughly. Legitimate lenders will not rush you.

   
   

6. Suspicious Online Presence: Scammers may create fake websites or use names similar to reputable companies.

   Action:

   • Look for reviews on trusted platforms.

   • Avoid lenders with consistently negative reviews or no online presence.

What to Do If You’ve Been Scammed

If you suspect you've fallen victim to a loan scam:

1. Report the Scam: Contact Bank Negara Malaysia and the Malaysian Communications and Multimedia Commission.

2. Secure Your Data: Monitor your accounts for unusual activity and consider freezing your credit.

3. Seek Legal Advice: Consult a lawyer for guidance on next steps.

Conclusion

Loan scams in Malaysia are a serious threat, but by staying informed and vigilant, you can protect yourself. Always research lenders, scrutinise terms, and trust your instincts. Remember, legitimate loans require due process and documentation, safeguarding you from the perils of scams. Or, you can always use MoneyMart Asia, a one-stop platform linking legitimate borrowers to legitimate lenders.

Stay alert and protect your financial well-being.

Photo by Kasia Derenda on Unsplash