As the festive spending ramps up, so do advance-fee loan scams and fraudsters. Ayanda Ndimande, Strategic Business Development Manager at Sanlam Credit Solutions, warns that fraudsters often target consumers who might struggle to access a loan from verified lenders as these fraudsters offer consumers fake loans that seem too good to be true.
What is an advance-fee loan scam?
“Scammers often promise large loans which don’t require credit checks that are sent consumers as an email, advert flyer or an SMS notification on your phone,” Ndimande cautions. “For example, you could be asked to pay a small amount of money upfront, such as R1 000, which 'unlocks' access to up to R100 000 with a 4% interest rate. However, once you pay, you never receive the loan,” Ndimande explains.
The most significant warning sign is often the promised interest rate, especially if it is substantially below the prime rate, currently at 11.25%. The prime rate is what banks typically offer to their most creditworthy clients, so a verified lender would rarely, if ever, offer rates far below this. Any rate below 5% should immediately raise a red flag.
How to spot a scam
Ndimande says: “Every year, these scammers use techniques that get increasingly more sophisticated to lure consumers in, so it’s vital to know what to look out for.”
When a notification comes in, offering you unprecedented access to a cash loan, Ndimande says you can spot a scam by checking for the following:
1. Lack of personalisation: Legitimate lenders personalise correspondence. At Sanlam, we would say, ‘Dear [your name]’, rather than, ‘Dear client’.
2. The branding may look legitimate—but take a closer look. Even if you're unfamiliar with a company's branding, subtle details can reveal that something isn't as professional as it appears. Watch for inconsistencies in font styles and sizes, overly colourful designs, or a lack of polish. Additionally, poor spelling, punctuation, and grammatical errors are major red flags. Legitimate lenders pay close attention to their language and presentation so that small mistakes can signal a potential scam.
4. Be wary of dodgy contact information: Legitimate lenders will never use a cellphone number as a single point of contact. Also beware of those who use a bulk email service, like Gmail, in their contact details.
5. Look for legitimate authority details: Trustworthy financial institutions are compelled to include their standard authority markers in all correspondence with consumers. Ensure that the lender is registered as a Financial Services Provider (FSP) and authorised by the Financial Services Board (FSB).
How to secure your personal information
“Fraudsters will go to great lengths to get hold of your personal information, so make sure you keep it secure,” Ndimande says.
Protect your passwords. Use strong/difficult passwords and avoid storing them all in one place.
Delete all your banking notifications and SMSs as soon as they come in. If someone steals your phone, you don’t want them to immediately know who you bank with.
Place your banking app(s) in a hidden space on your phone.
Shred or burn all physical copies as soon as you’re done with them.
If someone has ‘stolen’ your identity to access a loan, the best way to spot this is to check your credit report regularly for unusual activity. An account goes into arrears after the first month of non-payment and can be handed over to legal collections after the third month. Checking your credit score regularly allows you to identify and address issues before they escalate to this stage.
What do I do if I get scammed?
“Firstly, never respond to one-time pins (OTPs) if you’re not transacting; check your bank statements regularly for suspicious transactions; and monitor your credit report closely, ideally monthly,” Ndimande says. “Any irregular changes or movements could flag fraud. If you suspect someone is using your banking details to gain access to credit, alert your bank immediately and request them to close your account for further investigation. Also, report the crime to the police and obtain a case number, as this will likely be required for follow-up and resolution.
“Check your credit score regularly as well. If your score suddenly shifts but your behaviours have stayed consistent, that’s another big red flag. Sanlam Credit Solutions gives you free access to your score and report so you can keep tight control over your credit use.”
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