Bridge Loan Scams: Reviewing Their Impact
Table Of Contents ➔ What Are Bridge Loans? ➔ Benefits & Disadvantages ➔ Introduction To Bridge Loan Scams & Fraud
➔ Ways To Spot Scams & Fake Schemes
What Are Bridge Loans? To explain it in simple terms, bridge loans are short-term, temporary loans that individuals and companies can avail quickly, especially when they are waiting to secure traditional loans or funds. This helps them to solve their most pressing financial obligations and therefore, are most commonly used by entrepreneurs waiting for their equity financing funds, homeowners who wish to get out of foreclosure demands, or real estate investors who hope to seal a property deal before their competitors. These come with high interest rates and require little documentation.
Benefits & Disadvantages PROS ● ●
●
Quick access to financing Use it to pay downpayment for a lucrative property No monthly payments for the first few months
CONS ● ●
●
●
High interest rates High chances of getting defrauded by scammers May become a huge problem if you are unable to secure permanent financing modes later Expensive processing fee
Why Are Bridge Loan
Scams On
The Rise?
Because of the pandemic-induced restrictions, many financial institutions are taking longer than usual to verify loan requests and conduct the necessary processes. As a result, more and more people are turning towards non-QM loans, such as these. Naturally, due to their high demand, many fraudsters have also set up shop in this arena. They may pose as certified lenders, ask you to fill spammy documents and then demand money to process the loan. However, once they get the fee, they stop all contact with the client in question. Let’s look at the various types of bridge loan scams in the following slides.
1. Upfront fee scams
This involves fraudsters asking you for money upfront. It can be difficult to determine their authenticity as all bridge money lenders require a certain amount of fee to initiate the documentation process.
2. Bait & switch scams
Here, the lender may unexpectedly raise their rates at the last moment, especially if they know that you have no other option but to opt for whatever they offer. In such scenarios, the lender will try to use your situation to get more money out of you. Such scams and fake schemes can also involve increasing transaction charges citing unnecessary expenses on part of the lender to process your loan request.
3. Identity theft
In such types of scams, fraudsters may urge you to enter your personal information and bank details into fake websites impersonating those of authentic loan providers. These fake websites allow them to steal your information easily, after which they may use your identity to bend the law.
How To Spot Such Scams & Stay Safe? ● ● ● ● ● ●
Fraudsters often use high-pressure sales tactics to get you to sign up for their fake schemes as soon as possible. So, be cautious. Check reviews of lending firms before sharing your information with them. Are they asking you to transfer money to an individual account? It might be a fake scheme. If they are claiming that they require hardly any documentation, it might not be safe to deal with them. Review their website and social media handles. Have they been around long? Stay away from spam emails! If their spam messages are riddled with grammatical errors, hidden links, and spelling mistakes, there is a huge chance of being scammed.
THANK YOU! Presented & Reviewed By: Vinayak Joshi,
Manager, Money 2.0 Conference https://www.money2conf.com/