How to determine if a preapproved loan offer is legit

If you have a credit history, it’s likely that you’ve received one of them: a large envelope with the name of a respected financial institution or some unknown lender promising a great rate on a loan.

But can you trust it? With dozens of lenders sending out these marketing tools, you’ll want to learn how to tell the good from the bad.

What does it mean to be preapproved for a loan offer?

Being preapproved for a loan means that you’ve met the basic eligibility criteria to apply. It doesn’t guarantee a loan, and because it’s based on a soft credit check with only preliminary information, the lender won’t yet have all of the details required to make a final decision.

Why am I getting offers from lenders I’ve never heard of?

These offers often come unsolicited. They can be from a bank you do business with or an institution you’ve never heard of, and the loan can be for any amount and come with any terms.

The point of preapproval offers is to sell you a loan. It’s a marketing tool that many lenders, from big banks to local short-term lenders, find effective. While you may be tempted to dive right in, take a step back to fully evaluate the offer and who it’s from.

Why am I receiving these loan offers?

Generally, all you need is a credit history to start receiving preapproval offers in the mail. Creditors can check with different reporting bureaus to learn whether you match the minimum criteria needed to take out a loan. Because your credit can shift monthly, it’s possible to qualify when the lender conducts the pull but not when it makes the offer.

Certain events might also attract loan offers. It’s not unheard of to receive multiple loan offers if you recently financed a new car purchase or have recently been applying for other forms of credit.

6 warning signs of a preapproval scam

Not every letter you get in the mail is honest. If you’ve received an offer that looks suspicious, trust your gut. There are plenty of scams out there. These six signs can help you avoid sinking money into a fake loan offer.

1. “100% guarantee” There’s no such thing as guaranteed approval. Too many variables can change between when you actually apply for a loan and when you receive an offer. Lenders that advertise this are trying to get you to take out a loan, often with high interest rates and unbearably large fees.
2. Upfront fees. If a lender requires you to make payments upfront, it’s a huge red flag. There’s never a time where you’ll need to give your credit card information to make a payment before you get funded.
3. Requests cash payments. Similar to charging upfront fees, a lender stating that you can only pay with cash, money transfers or gift cards is likely running a scam. These are untraceable, and you may not be able to get your money back once you’ve been scammed.
4. Urgency. Anytime there’s a rush to get you to apply, take extra time to research it. Scammers will try to push you through the loan process as quickly as possible so you don’t have time to determine if something is off.
5. Hard-to-find or no contact information. Even online lenders have physical addresses and customer service phone numbers. If a lender hasn’t listed a company address or their customer service line isn’t working, skip it and seek another loan.
6. Unsecured website. If the website you’re accessing isn’t secure, be extremely cautious. Some form of encryption is an industry standard to keep your information safe. This may not be a lender scam, but hackers can easily take your personal information if a website isn’t secure.

Here’s how to avoid a personal loan scam

What to look for in a legit preapproval offer

So how do you know when a loan offer is legit? There are signs that a preapproval offer is real before you sit down to research.

• Upfront terms. A real offer will have terms and conditions attached for you to review, even if they’re a mile long. This signals that the lender has rules that you need to follow, which means your loan offer is much more likely to be legit.
• A name you trust. An offer from a big-name bank or financial institution, especially one you already do business with, is more likely to be legit. However, keep an eye out for inconsistencies. Scammers have designed fake preapproval offers to mimic the look of established businesses.
• BBB rating. Even if you’re unfamiliar with the lender, Better Business Bureau profile can be a good indicator of legitimacy. Reviews, both good and bad, can be used to gauge the experience of other customers, and accreditation is almost always a positive feature.
• Easy to contact. You should be able to easily find the lender’s phone number, email and website. When you reach out to talk, the customer service team should be available to answer any of your questions.
• No promises. There shouldn’t be a guarantee of approval or rates because the lender can’t determine if your credit will remain the same from when you receive the offer to when you apply.

What should I do if I’ve been scammed?

First things first: Stay calm. Falling for a preapproved loan offer isn’t the end of the world, and there’s no reason to be embarrassed. Once you’ve collected your bearings, start recovering by following these steps.

1. Cease contact with the fake lender
2. Report the crime to the police
3. Report the fake lender to the Consumer Financial Protection Bureau (CFPB)
4. Make sure your bank and credit card accounts are secure
5. Contact Experian, Equifax and TransUnion and file a fraud alert
6. Change your passwords

Unfortunately, you may not be able to get your money back if you’ve sent it by wire or paid with a gift card. But the good news is you can still help others and prevent any further damage to your accounts and your credit.

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Bottom line

An offer for low interest and quick funding might sound tempting, but you should always be prepared to research any preapproval offer your receive. Before acting on the loan, look over the information you’ve received completely. Check for any red flags and listen to your gut if it tells you something is off.

Even if the offer you receive isn’t legit, there are other legit lenders that offer preapproval online for your to apply with.

Frequently asked questions

Can I opt out of preapproved offers for a family member?

No. Unless you are the legal guardian of the individual you wish to opt out for, you may not submit a form on their behalf.

When can I expect the preapproval offers to stop?

If you’ve gone to the Opt Out Prescreen website, called the number or written the main credit bureaus, you may be wondering why the offers haven’t stopped. Even though Equifax, Experian and TransUnion are notified within five days, it can take a while for the effect to fully be realized. Because some creditors may have had your information before you submitted your request, they can still send offers until the request is in their databases.

Can I be denied a loan that I was preapproved for?

Yes. You aren’t guaranteed to receive a loan you were preapproved for. Unfortunately, a soft credit check doesn’t pull all of the necessary information for a full confirmation of qualifications.

Will a preapproval offer hurt my credit score?

No. Because the preapproval process relies on a soft credit pull, your score won’t be affected. However, when you submit a full application, the lender will conduct a hard credit pull of your credit history, which can slightly affect your score.