Not every loan offer is what it seems. To protect your financial health, it’s important to verify a lender’s credentials and reputation before signing anything. From checking government registries to spotting red flags like upfront fees or unclear loan terms, a little research into lending companies goes a long way. Read on to find out how to check if a company is legitimate in Canada.
Key Points
- Fraudsters often lurk within the lending space.
- To protect yourself against scammers, be sure to do some online research and ensure they have a physical and/or online presence.
- If you’ve been targeted by an illegitimate lending company, contact your bank, the Canadian Anti-Fraud Centre, credit bureaus, and the police.
How To Check If A Loan Company Is Legitimate In Canada
Here are a few ways to make sure the lender you’re working with is trustworthy before committing yourself to a loan agreement:
1. Check Online Customer Reviews
A quick and simple way to find out if the lender is legitimate is to conduct an online search to see what previous clients have to say about their experiences. Ideally, there should be ample reviews, as it can be more difficult to fake thousands of reviews.
There are plenty of review websites you can check, like Trustpilot. Thousands of new customer reviews are added to the site every month, so you can get the most recent and up-to-date reviews on a lender you’re considering working with.
In addition to review sites, check out online forums where customers post their opinions and engage in online conversations with others about their experiences with various companies, including lenders. You can even post your own query if you have a specific question that you’d like answered.
2. Check The Better Business Bureau (BBB)
The Better Business Bureau (BBB) is another resource you can use to verify the legitimacy of a lender. It’s a good sign if the business is BBB accredited and has been rated by the platform. Previous customers can report lenders for unfair treatment if they’ve had bad experiences, while others may report good experiences.
3. Check Government Sites
Besides the BBB, you can also check out the Financial Consumer Agency of Canada (FCAC) or the Canadian Consumer Finance Association (CCFA). These are government offices that keep a log of customer complaints for various entities.
4. Look For A Physical Address
If the loan company you work with has an office, employees, and a customer service phone line, that’s a good sign that they’re a legitimate loan company. On the other hand, if the company has no office, no evidence of real employees, and no phone number, this may not be a good sign.
While there are plenty of legitimate online-only loan companies, you have to be cautious in that space, as it can be hard to differentiate between legitimate and fraudulent lenders.
5. Look For A Secure Website
When applying for a loan, you need to supply the lender with plenty of sensitive information about your personal profile and financial health. As such, you want to make sure that the website you’re inputting this data into is secure and not vulnerable to third parties with bad intentions.
Legitimate lenders’ websites should securely encrypt client information with a robust layer of protection that will bar outsiders from accessing your personal and financial data. In most cases, websites that are secure will have a padlock sign to the left of your address bar.
Legitimate Lenders In Canada
Filters
- Amount
- Up to $35,000
- Rate
- 9.99% – 34.95%
- Term
- 6 – 84 Months
- Amount
- Up to $60,000†
- Rate
- 19.99% – 34.99%*
- Term
- 6 – 120 months
- Amount
- $500 – $10,000
- Rate
- Up to 34.99%
- Term
- Up to 60 months
How To Tell If A Loan Company Is NOT Legitimate
There are many scammers in the alternative lending industry who pose as lenders. Their goal is to steal money and personal information from you. With enough sensitive information collected, these fraudsters can steal your identity and use it for numerous criminal acts.
Here are some telltale signs that your lender is a scammer.
1. A Deal That Seems Too Good To Be True
Everyone wants the best deal when it comes to getting a loan, but it’s also important to be realistic. If a loan company is promising you an outstanding deal, you should be wary.
If you have to ask the question “is this too good to be true?”, it probably is. You should trust your instincts and go elsewhere.
2. Mandatory Upfront Fees
This is one of the clearest and easiest ways to tell if a loan company is not to be trusted. A legitimate loan company will never ask you to provide a payment or pay a fee before you actually receive your loan. If a lender asks for upfront payment, look elsewhere.
3. No Lender License
Lenders should be licensed to work in their respective provinces or territories. If you can’t find a lender’s license number on their website, or they’re unwilling to provide that information upon request, you may want to consider working with someone else.
4. Aggressive Sales Tactics
Taking out a loan is a major commitment, so you want to make sure you’ve taken the time to consider all factors before taking out a loan. Lenders should not make you feel as though you need to act immediately for any reason.
5. No Underwriting Process
Legitimate lenders go through a specific process to make sure you are financially qualified to carry a loan and manage it responsibly. This involves conducting a credit check on you to verify your creditworthiness or a background check to assess your finances. Be wary of lenders who guarantee loan approval without any sort of check on you, as this will only put you in a financial position that you may find difficult to get out of.
Are Pre-Approvals Legitimate?
Loan pre-approval involves an evaluation of your personal and financial information to verify your identity and assess your income and employment. It may also include a credit check to verify your creditworthiness.
Getting pre-approved is recommended before formally applying for a loan, as it will give you an idea of what you can get approved for based on your credit and financial profile. But pre-approval is not a promise of loan approval; it’s merely an estimate.
Having said that, a legitimate lender won’t make you an offer for a pre-approved loan without doing any background check on you. But if they do, they’ll inform you that the offer is not guaranteed and that your personal and financial information will first need to be checked before an actual pre-approval is provided.
Any lender that promises to pre-approve you for a loan without having conducted any checks on you is a potential sign of a predatory lender.
Take The Loan Agreement To A Lawyer Or Other Professional
Before you agree to sign anything, you should have a lawyer look over the contents of the agreement. If the loan company objects to this, that is a huge red flag. Going with a lawyer is always a good idea, as they might be able to catch things that you may have missed.
Once they give you the go-ahead, you should feel good knowing that you have done all you could to prevent yourself from getting scammed. However, there are never any guarantees, as scammers are getting increasingly sophisticated at making their operations look legit.
Learn more: Borrower Rights: High-Interest Loan Legislation In Canada
What Happens If You’ve Been The Victim Of A Loan Scam?
Scams can happen to anyone, and unfortunately, many Canadians are targeted every year. If you think you’ve been a victim of illegitimate loan tactics, it’s time to act fast. In this case, be sure to contact the following parties:
- Local Police: Report the scam to the local authorities.
- Canadian Anti-Fraud Centre: File a report through their official website and follow their instructions.
- Your Bank: Alert your bank to monitor for suspicious activity and secure your accounts.
- Credit Bureaus: Request a credit alert to help prevent identity theft or unauthorized credit activity.
Additional Reading
Bottom Line
Ultimately, you need to trust your gut and judgment when it comes to working with a lending firm. However, you can use the information above to help you find out if a loan company is legitimate, or if they are just trying to scam you.
How To Check If A Company Is Legitimate In Canada FAQs
How do you find out if a loan was taken out in your name?
Are online loans legit?
Do I need to provide my SIN for a loan?
Is it okay to provide my banking information to a lender?
®Fairstone Financial Inc. is a wholly owned subsidiary of Fairstone Bank of Canada.
*Interest rates are subject to change. Actual Annual Percentage Rate (APR) varies based on the province of residence and individual factors like credit details and loan amount. The interest rate on an unsecured personal loan is 31.99% in BC.
†On approved credit. Terms and conditions apply. Interest rates vary by province/territory and from customer to customer based on factors like credit score and borrowing history. See Fairstone’s website for details.
Fairstone Financial Inc. holds high-cost credit licenses in AB, MB (License #85047, expiring 20-02-2026) and QC; it has applied for a high-cost credit grantor license in NL. For license information by province, visit Fairstone.ca/HCCG
In Ontario, Fairstone Financial Inc. is licensed as mortgage brokerage 10821.
In Nova Scotia, Fairstone Financial Inc. is licensed as mortgage lender #2021-3000028.
