MSE News

Applying for a loan? Beware being asked to pay an upfront fee as scams have more than doubled

If you're applying for a loan, or have recently done so, watch out if you're asked to pay an upfront fee. Scammers have been increasingly tricking people into paying an 'advance fee' - and sometimes multiple fees - for a loan they will never end up getting. Here's what to watch out for.

The warning comes after reports of so-called 'advance fee' loan scams have increased 90% this year according to new findings by high street bank Lloyds, with victims losing an average of £200. 

See our 30+ ways to stop scams guide for more information. 

Tell-tale signs of an 'advance loan fee' scam

Such scams see fraudsters target victims by creating a fake loan company and then luring people to it via social media or online adverts. Or they might set up something like a loan comparison page where the customers input their information in order to get a 'quote' and then contact them from there. 

Scammers will then reach out to unsuspecting victims to say their loan (which they will never receive) has been approved, but that they need to pay an upfront fee in order to access it.

Some of the most common reasons fraudsters use to get customers to pay an upfront fee are:

  • Guarantor fee
  • Loan company fee
  • Payment release fee
  • Processing fee
  • Tax payment 
  • Verification fee

Once one payment has been made, fraudsters might then continue to ask for further money for other related fees.

Legitimate lenders will NEVER request upfront payment

But a legitimate loan company will NEVER request an upfront payment before sending the funds to you, according to Lloyds. We also checked with UK Finance, which confirmed that normally, any associated fee would be included within the total loan amount owed, although they couldn't confirm this would be the case for all loan companies. 

Remember, if something sounds too good to be true, then it probably is. If a product is the cheapest you've ever seen, you're offered free advice or promised fast cash, it's probably a scam. 

Use our Loans eligibility calculator and see our Cheap personal loans guide for legitimate lenders' best buys. 

If you're worried you've been scammed, here's what to do

Below is a checklist of what you should do if you think you've been scammed:

  • If you've already responded to a scam, end all further communication immediately.
  • Call your bank directly and cancel any recurring payments – for speed and ease, you can alternatively call the new 159 hotline.
  • Report the scam to the police through Action Fraud on 0300 123 2040, or report a scam anonymously on the Action Fraud website. If you're in Scotland, report a scam through Advice Direct Scotland on 0808 164 6000 or on the Advice Direct Scotland website. You can also report scams to Police Scotland on 101.
  • If you wish to seek further help, contact Citizens Advice Scams Action via the Citizens Advice website, or call its Scams Action helpline on 0808 250 5050. Alternatively, you can contact the Financial Conduct Authority's helpline on 0800 111 6768. 

Here's how to report a wide variety of scams quickly

The National Cyber Security Centre (NCSC) provides advice and support for the public and private sector in how to avoid computer security threats and sets out a number of different ways to report scams depending on the type:

  • Phone scams. For those in England, Northern Ireland or Wales, these can be reported to Action Fraud's website or by phoning 0300 123 2040. For those in Scotland, you can phone 101. 

  • Email scams. If you get a dodgy looking email you can report it to the NCSC by forwarding it to Remember not to click on any links within these emails.
  • Text scams. If you get a suspicious text message you can forward it to the number '7726' - this will allow your provider to track the origin of the text and arrange to block or ban the sender if it's a scam. You can also report scam text messages to by providing a screenshot of the text message.
  • Website scams. If you notice a website that doesn't look quite right you can easily report the URL to the NCSC directly via its online form.
  • Scams adverts. These can currently be reported to the Advertising Standards Authority (ASA) through its online form. But as the new Online Safety Bill will include online scam ads it means regulators will have to work proactively with social media platforms and search engines to take them down. In the meantime, however, you should report any scam ads to the ASA.


MSE weekly email

FREE weekly MoneySaving email

For all the latest deals, guides and loopholes simply sign up today – it's spam-free!