by : J Tillotson

There are many different types of loan available, and the latest ones to appear seem to be too good to be true for people with bad credit ratings who can't get a regular loan. Unfortunately, if something seems too good to be true, it usually is.

These loans are usually advertised as guaranteed cash loans, low interest rates, pre-approved or no applicant refused. Understandably, people who have been refused loans from other, legitimate, sources are tempted by these advertisements.

The first alarm bell for a so-called scam loan should be the requirement of an up-front fee. Occasionally, loan brokers will ask for a one-off fee of ?50 or thereabouts, to cover their admin costs while they search different lenders on your behalf. They promise you will get this fee back if they don't manage to find you a loan.

Then there are the brokers who charge a much higher fee, apparently for administration and insurance, and offer the same guarantee - get your fee back if you don't get a loan through them. People pay up the fees and let the company search for them.

The problems arise when customers, expecting the offers of low-cost to come flooding in, contact the company they paid their fee to, only to be given the bad news that a lender was unable to be found. When the customer asks for their fee back, they are given a premium rate number to call. This is then the start of numerous phone calls to expensive numbers, and only rarely culminates in a fee refund. More often than not, the poor customer is left out of pocket from both the fee and the phone calls.

In the event of a loan actually being arranged in this way, the amount offered is often less than the original amount applied for, and the interest rate much higher. The brokers appear to get around this by informing the customer that the credit checks didn't come back as expected, or the lender offering that particular rate of interest has had to increase it.

The bottom line is, if you can't get through safe channels such as your bank, building society or a high-profile comparison site, then they're not worth having.