How To Find Out If A Loan Company Is Legitimate

How To Find Out If A Loan Company Is Legitimate

Written by Kale Havervold
Fact-checked by Caitlin Wood
Last Updated December 7, 2022

Whether you want to buy a car, a home or simply need some extra cash to cover an emergency, loans are an integral part of our lives. While there are numerous banks and credit unions that offer loans, those with bad credit or poor finances aren’t always able to qualify. In such cases, many Canadians with bad credit will turn to alternative lenders. Unfortunately, it isn’t always easy to which lender is legitimate.

How To Find Out If A Loan Company Is Legitimate?

Here are a few ways to make sure the lender you’re working with is trustworthy before committing yourself to a loan agreement: 

Do Some Online Research

The first thing you should do when you are trying to find out if a loan company is legitimate is to do some online research. Heading over to Google and looking up the company name is a good place to start. This could give a ton of information about the company and what others are saying about it. 

Check The BBB

You can also run their name and site through services like the Better Business Bureau to see if they’re accredited. The Better Business Bureau (BBB) is another resource you can use to verify the legitimacy of a lender. Previous customers can report lenders for unfair treatment if they’ve had bad experiences, while others may report good experiences. Just be wary of companies with no reviews, as this could be indicative of a scam.

Make Sure They Have An Actual Office And Real-Life Presence

While a nice site and testimonials are great, scams are becoming increasingly sophisticated. When trying to determine if a company is legitimate, it’s important to check their real-life presence by verifying their location and phone number. 

If the loan company you work with has an office and employees and a customer service phone line, it gives you that little bit of extra reassurance that they are a legit loan company. If the company has no office, has no evidence of real employees and provides no phone number, you should probably look elsewhere, as there is no way for you to confirm that they are indeed a real loan company. 

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 ones that are legitimate and which ones are not.   

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.

Check The 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’s hard to fake thousands of reviews

Other Ways To Check If A Lender Is Legitimate In Canada

There are other resources to check out to verify whether or not a lender is trustworthy before signing a loan contract:

  • FCAC or CCFA Complaint Directory. 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. 
  • Trustpilot. Many Canadians use Trustpilot to review various types of companies and services, including lenders in Canada. 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.   
  • Online Forums. 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. 

For the most accurate results, consider using all resources mentioned. 

Legitimate Lenders In Canada

Filters

Loans Canada

Amount
Up to $50,000
Rate
2.00% to 46.96%
Term
3-60 months

Loanz

Amount
$1,000 - $15,000
Rate
29.9% - 46.9% APR
Term
12 - 60 months

Symple Loans

Amount
$5,000 - $50,000
Rate
6.99% - 22.99%
Term
Up to 84 Months

Spring Financial

Amount
Up to $15,000
Rate
14.99% to 46.96%
Term
6 - 12 Months

goPeer

Amount
$1,000 - $25,000
Rate
7.5% - 31.5%
Term
36 - 60 months

Cash Money

Amount
$1,500 – $10,000
Rate
Varies by province
Term
Varies by product (up to 60 months)

Lendful

Amount
$5,000 - $35,000
Rate
Starting at 9.99%
Term
6 - 60 Months

Loan Away

Amount
Up to $5,000
Rate
19.9% to 45.9%
Term
6 - 36 Months

LoanMeNow

Amount
$500 - $1000+
Rate
28 to 32%
Term
3 Months

Consumer Capital Canada

Amount
$500 - $12,500
Rate
19.99% to 34.99%
Term
No minimum term

Mogo Finance

Amount
$300 – $35,000
Rate
9.9% - 47.72%
Term
3 - 60 Months

Fairstone Financial

Amount
Up to $50,000
Rate
19.99% - 39.99%
Term
6 - 120 Months

How To Tell If A Loan Company Is NOT Legitimate?

There are many scammers in the alternative lending industry who pose as lenders. These scammer’s goal is to steal money and personal information from you. With enough sensitive information from you, certain scammers can steal your identity and use it for numerous criminal acts. 

Here are some telltale signs that your lender is a scammer.

Be Wary If A Deal Is Too Good To Be True

We all want the best deal when it comes to getting a loan, but we also need to be realistic. If a loan company is promising you an outstanding deal, better than everywhere else, 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. If a company can actually offer deals as good as they say they can, you would likely have heard about the deals and the company would have some press.

Watch Out For Upfront Fees

This is one of the clearest and easiest ways to tell if a loan company is illegitimate. A legitimate loan company will never ask you to provide a payment or pay a fee before you actually receive your loan, so if they ask you to do so, you should cease communication with them. No upfront payment will ever guarantee you get a loan, so don’t fall for that either.

No Lender License 

Lenders should be licensed to work in their respective provinces or territory. If you can’t find a lender’s license number on their website or they’re unwilling to provide that information upon request, look elsewhere. 

Puts Too Much Pressure on You

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.

For instance, lenders who put pressure on customers to take advantage of today’s low rates before they disappear should be avoided. While loan rates are affected by current market conditions, the rate you ultimately get will be based on your credit score and financial health.

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 requires that the lender evaluate your personal and financial information to verify your identity and assess your income and employment. They may also conduct a credit check to verify your creditworthiness. 

Getting pre-approved is recommended, 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, but 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 sadly getting better and better at making their operations look legit.

Loan Scams FAQs

How do you find out if a loan was taken out in your name?

You can see if someone has secured a loan in your name by pulling your credit report. In fact, accessing your credit report at least once a year is recommended and it’s free from the major credit bureaus in Canada, like TransUnion or Equifax. Checking your credit report regularly will help you spot any errors or suspicious information and protect yourself against identity theft or fraud. 

Are online loans legit?

Yes, online loans are legitimate, as long as they’re from reputable lenders. Do your homework on the lender to ensure their legitimacy before applying for a loan. 

Do I need to provide my SIN for a loan?

No, lenders don’t need your SIN when you apply for a loan. It’s not legally required. That said, some may ask for this information in order to conduct a credit check.

Is it okay to provide my banking information to a lender?

Many honest lenders may ask for your bank account information to verify your identity and deposit the loan funds. However, don’t give out your banking information unless you’ve done your due diligence and ensure that the lender is legitimate. 

Bottom Line

Ultimately, you need to trust your gut and judgment when it comes to things like this. 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 people.

If you have been scammed, it is a good idea to report it to your local law enforcement right away. While there is a chance you won’t get your money back, hopefully by reporting it, the authorities will be able to locate and shut down the individual or company that is tricking people with loan scams.


Rating of 4/5 based on 11 votes.

In his over six-year career as a professional writer, Kale has focused on writing about finance, technology, cryptocurrency, entertainment, and sports. Kale's work has been published on Yahoo, RentHop, the Regina Leader-Post, LoansCanada.ca, and ReboundFinance.com. Kale loves to create a wide variety of personal finance-related content. Including everything from how-to guides to featured articles, to advice pieces and everything in between. Whether he’s writing about the newest piece of technology or providing tips to help people with their finances, Kale is passionate about educating Canadian consumers and making sure they have the information they need to make the best decisions.

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