Loans are often offered via Instagram and Facebook. But beware! Rip-off threatens here – the fraudsters are just a click away. Life can be pretty expensive. If you do not have a new smartphone model or trendy branded clothes, you will quickly be forced to act. Providers on Instagram, Facebook or Twitter often offer help: just provide some information, you don’t need collateral any more than you need Credit Bureau information – and money ends up in your account. Maybe. Probably not.

What can happen, you might be wondering. There are basically two options. You actually get the amount you need. But now you have to pay them back, mostly with very high interest rates. You don’t get any money. Instead, other unexpected things happen: You may get a visit from the intermediary and should, for example, sign insurance contracts or transfer money in advance.

How the rip-off works

So you see: No matter how it comes, it is different than you thought. Unfortunately there are very different ways of rip off. Therefore there is no explanation in one sentence. The following overview should give you an impression of what can happen:

You have received money that you should pay back with interest. Interest is the fee for someone lending you money. For example, if you borrow 1000 USD and the annual interest rate is 10 percent, you pay back 1100 USD after twelve months, which is 100 USD more. Have a look at your savings bank to find out how much interest there is on an installment loan. If it is much lower there than at the provider who offers you money without any collateral, you should be worried.

There is no reason to accept a contract with a much higher interest rate.

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If you cannot pay the Credit Bureau-free loan, a debt collection agency will probably get in touch with you. And then it gets much more expensive. Or you should sign other contracts that only drive you deeper into the debt trap.

You didn’t get any money. Instead, the postman brings a letter. Then you probably weren’t dealing with a financial institution, but only with an intermediary. So he’s just looking for a bank that will give you a loan. For this he gets money that you have to pay now.

You don’t even know if you can get a loan at all – or not.

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You haven’t got any money, but a visit is coming: You are supposed to take out a savings product or insurance with the lending bank as security or fill up a prepaid credit card with credit beforehand. This is nonsense. This should only pull more money out of your pocket. It has nothing to do with your credit.

You still have no money, but now you should pay for the agent’s expenses: travel or postage, for example. This is also not a serious loan, but a rip off. If this has happened to you, contact the consumer advice center first. Maybe she can help you. If not, you should consult a lawyer. In the worst case, you have to bite the bullet and bear any costs that may arise.

How to do it better

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If your money is tight, first ask your parents or grandparents if they can help you. If that doesn’t work, get advice from your savings bank. If you are told there that you cannot get a loan, you should accept it for your own protection. Then you just have to bake smaller rolls. When you get a loan, keep in mind that you need to be able to pay the installments on a monthly basis. If that doesn’t work, contact a debt counseling service or the consumer advice center as soon as possible.