Who would you choose to lend money? Someone who can pay it back. Preferably, someone who also pays an extra for the time you were without the funds you lent.
It’s possible to forgive a loan if you’ll never pay it back, although that may stop you from getting further loans. The idea of getting rid of debt overnight sounds too good to be true.
Every year, hundreds of thousands of honest, hard-working people apply for the forgiveness program. Less than one percent get approved. Yet, you believe the odds are in your favor.
Yes, you should apply because you never know if you’re that one percent. On the other hand, you should know when opportunities look to be true. If someone guarantees to leave you debt-free, you may be dealing with a loan forgiveness scammer.
- What Is Loan Forgiveness Fraud?
- Are All Loan Forgiveness Programs Scams?
- Types Of Loan Forgiveness Scams
- How To Prevent Loan Forgiveness Scams
- Wrapping Up
What Is Loan Forgiveness Fraud?
You qualify for loan forgiveness when:
- You used the money to contribute to society
- You can prove your financial situation was unfair
- You’re an underpaid public teacher, a government worker, a soldier, or similar.
But those aren’t the people who scammers target. Instead, they look for:
- Students who carry huge debt from college
- People falling behind their mortgage (read our Mortgage Fraud guide)
- An elder who can’t cover medical expenses
- Persistent debtors (usually, victims of past scams)
In this scam, a con-man promises to solve all your debt problems for a fee. What usually happens is:
- They run away. You never get any help.
- They free you from your lender and become your new lender at a higher interest.
- They steal your identity
If you’re not careful, loan forgiveness scams could cost all your bank account money.
Are All Loan Forgiveness Programs Scams?
Not everybody who promises to help you will do so. Some will lie with results they can’t accomplish to win your trust. Before you hear what they have to say, ask yourself: Is it the right person to help me?
The offer looks too good to be true. The person shows you the ultimate debt relief plan, no risk involved. It doesn’t matter if you have the most complex case in the world. He solves all the problems for you and brings peace of mind.
It doesn’t take much thought to find out how ridiculous the scenario gets. This person claims to forgive your loan, no matter how big it is, regardless of your history. If that’s true, it motivates others to take loans they can’t pay off with because he promises to get rid of all debt for a tiny fee.
Unless they closely work with your lender, a 3rd party can not solve 100% of your loan problems.
Why do we think their claims are idealistic? Because they sell that one size fits all. No matter who you are, what you owe, or what you did, you will get your loan forgiven. They promote as if they knew some dark negotiation secrets that nobody ever told you.
Generalism stands for those who:
- Charge you a flat fee regardless of your case
- Talk more than they listen
- Don’t require any qualification to apply
#3 Instant Gratification
Not only they fix everything for you. They make your loan debt vanish as soon as you pay them the fee. Within days, if not hours, they’ll tell you they have everything under control. You don’t need to worry about anything while they’re working.
It’s not surprising why people want fast results. If you don’t pay, debt increases, and so the time to pay it back. It’s too easy to fall for their offers: “Pay your loan back TODAY, no matter how big it is!”
#4 Free Trial! Choose Your Payment Method.
A stranger offers to help you with a free consultation. In the call, he offers to negotiate with your lender to forgive your loan or set it to a minimum.
“I used to do it for $150, but today I’ll do it for free. I want to help you take control of your finances. You don’t need to pay $150, but you can give back after I relieve the loan debt to zero. “
You pay $150 if the service works, or it’s free. Great deal, right? Whether he delivers or not, you’ll need to register a payment method for this trial. Wait, wasn’t it free?
It doesn’t matter whether they charge you or not. If you share your sensitive data before getting the promised service, that person could rob your identity.
“After you sign in to our loan forgiveness program, you don’t need to worry about anything!”
Loan forgiveness for a couple hundred? That company must know what they’re doing. Now, how can they be the only ones making such promises?
By pay-to-win, we prefer to spend money to save money. No qualification: you just need to pay for the fee. This is a case of advance fee fraud.
#6 Pay Them To Pay For You
They promise to get rid of your debt, yet they can’t explain exactly how they do it. In fact, it’s so complex that you should let them do everything for you: just trust them with your money, and they’ll do the rest.
That sounds great as a last resource. Question: if you’re already in a complex debt situation, wouldn’t it be risky to trust your finances to some stranger?
Outsourcing is a luxury for those who have more money than time. When in debt, don’t pay someone to do what you could otherwise do yourself for free. If you don’t know what to do, do not assume others do. Wisely choose who you trust to help.
Types Of Loan Forgiveness Scams
Every problem has a solution. The question is: what are the consequences of those choices? Taking a second loan would pay for your first loan and win time. However, it may lead to higher interest rates, a bigger problem.
Mind that solving problems you don’t have may not lead to the outcome you want. Example: a bogus (incentivized) agent wants you to buy his debt relief program. But if he were in your position, what he’d do may be different from what he advises you (aka not working on your interests).
#1 Phantom Help/ Advance Fee Fraud
You’re falling behind your loan. You don’t know what to do, but someone approaches you, promising to somehow pay your loan back. You trust, pay, and wait.
The agent never gets back to you, and you never saw any return of your money. You just paid someone for a promise, and they vanished. How could we fall for such an obvious scam? Confidence tricks.
Before the rip-off, everything looked impossible to go wrong. The problem? You never got any documents, facts, nothing but words: a bogus loan company.
#2 Borrow To Borrow
As usual, someone reaches out offering instant loan forgiveness. You explain to them the situation, which they agree, and show you their action plan. Later, they ask you to pay X amount, so they can get rid of your debt immediately.
A few days later, you get a notice from your lender. Yes, the agent canceled your unpaid loan! Quite satisfied, you thank them for it and get back to normal life as if nothing ever happened.
Fast forward a few weeks, you get another notice. This time, your lender has changed, just as the amount did. Didn’t you get rid of borrowed money already? Sorry, your agent solved the problem by creating a bigger problem.
The con man created you another loan with more interest and paid for your first loan. He never told you you owed him money. The result? You keep owing more, except that the one who collects the money now is your scammer.
#3 Imposter Scams
You owe so much you have no intention to pay it back, so you choose the waiting game: do nothing and see what they do.
One day, a con man sends you an email posing as your lender. “This can’t go any further. You must pay off X hundred dollars within 24h, or we’ll start your prosecution.”
You were already in trouble, so you pay to avoid further problems. Now, you’ve wired money to a stranger whom you believed to be your lender.
#4 Imposter Phishing Scams
Another con man posing as your lender gives you great news.
“We understand your situation and apologize for any financial stress it may have caused you. We’ll forget about it and forgive your loan.
Visit this site and send me this form so you can confirm your loan forgiveness.”
That’s it: debt problems solved overnight by your lender’s goodwill. You visit the website, fill-up the form— including your sensitive data— plus some questions about the loan. Success!
As far as the real lender is concerned, he never approved loan forgiveness, and he neither knows about this imposter who did. You believe you paid it back, which only hides the problem as it gets bigger.
Now, the imposter has stolen your identity, and the little money you saved will follow.
How To Prevent Loan Forgiveness Scams
Knowing the red flags isn’t enough to avoid debt relief scams. Let’s say you’re $100K in debt, and you’ve tried every method imaginable. At such levels of desperation, one may rationalize: “It cannot get worse already.” “What if this program works?”
Thus, one ignores the red flags on purpose and convinces that the scammer is legit. Think about it: can the agent absolutely guarantee you’ll get your loan forgiven? On paper? Does he show you a plan in case he doesn’t deliver, or does he say: “Don’t think like that. That won’t happen.”?
#1 Consult Your Lender
You and your lender are responsible for the loan. That’s the first place where to look for solutions. If an agent reaches out promising to relieve your debt, consult your lender:
“I plan to pay off my loan with this agent who contacted me. Do you think what he’s promising is possible?” Often, the lender and the bogus agent think very differently.
Ask them for advice. Since they want their money back, they may suggest better ways to recover your funds; loan forgiveness isn’t one of them.
#2 To Borrow Or Not To Borrow?
People who take loans for their first time are often the ones who have loan problems. With the wrong financial habits, we may buy things we don’t need with money we don’t have.
We get a false sense of confidence the moment we get more money than we should. We believe that “money makes more money,” and therefore, paying loans back is easy. But how many times have big borrowers ended up worse than when they took the loan? Many.
Without a long-term plan, you can’t pay it back: one dollar borrowed today turns into two dollars in debt tomorrow.
We can’t say you shouldn’t take loans, but it’s the best way to avoid loan forgiveness scams. Consider our recommended options:
- Don’t take any more loans. End your future problems today by taking responsibility. To avoid taking loans later, create an emergency fund in case your income stream falls behind.
- If you can’t commit to the ideal option, lending from friends and family to get rid of loan interests. Someone interested in helping you will only ask for the money you borrowed.
- If you borrow from a lender, respect your “safety number.” How much can I afford to lose? The least money you borrow, the better. Rather than having one loan covering all your expenses, have it cover part of them, and take care of the rest with your income.
#3 Update Your Security
You need help with debt, which makes you vulnerable to scammers. Once they know you need money, they may use countless different schemes to attack: phantom help, advance fee fraud, phishing, impersonation, and all of them at once.
Be wary the next time they ask you for some sensitive ID information. If you need to share your FSA ID as a student, for example, change passwords right after it.
Perhaps you find what you expect to be a trustworthy agent, so you move forward with the deal. Once you commit to the program (shared data or paid), watch your account closely to spot potential identity theft. Think of frequent revisions as a good financial habit: you never know what you could have done wrong.
#4 Have Alternatives
You should never approach loan forgiveness programs as your only chance to get by. No matter how much money they give you, relying on a single source could mean losing it all.
Those programs help, but they should supplement your income and help, not do all the work for you.
The next time you think of taking loans, have a repayment plan ready. It’s not a good idea to ask for extra money unless you’re already generating income on your own. There are multiple non-traditional ways to make money without a degree or a skill:
- You can adopt better saving habits to recover faster
- You can arbitrage goods and services, buy low, sell high, and pocket the difference.
- You can manage your time better to step up at your job
Are you hoping for loan forgiveness? If applying for a loan was hard, qualifying for these programs is improbable. If you get approved too easily, your suspicions are right: debt relief scams.
The last thing you want is listening to the wrong person only to end up owning more than before. These crooks like exploiting people’s hopes and worries, if that means promising what’s impossible.
It won’t hurt to apply for relief programs. However, do NOT let desperation distort your expectations. The so-needed help a con-man promises may not exist.