Avoiding loan scams in the UK

Why loan scam awareness matters right now

UK consumers face a shifting fraud landscape. In the first half of 2025 alone, criminals stole an estimated £629.3 million, with confirmed cases up 17% year-on-year. Banks stopped a substantial share of unauthorised fraud, yet one area is surging - authorised push payment fraud rose 12%, showing scammers are adapting their playbooks. Put simply, more people are being targeted and more are being tricked into paying scammers directly.

Loan scams fit neatly into this trend. They often begin with an unsolicited message and end with a demand for an upfront fee for a loan that never arrives. The Financial Conduct Authority has warned about this pattern for years, and earlier data showed millions lost to loan fee fraud as awareness lagged. Today, the threat is compounded by impersonation scams where criminals pose as the FCA or a trusted broker, claiming they can recover funds or fast-track a loan if you pay a charge. In the first six months of 2025, nearly 5,000 impersonation reports reached the FCA, with hundreds of victims losing money.

Older adults are disproportionately affected. Around a quarter of identity fraud victims are over 61, and this group is often targeted for fake loans, account misuse and repayment cons. Illegal money lending also persists in England, with loan sharks exploiting social media to reach people facing financial pressure. The result is a high-risk environment where the wrong click can lead to real losses.

Understanding APR is not just about percentages - it is about knowing what you will pay in real terms. The same logic applies to recognising scams. Clarity reduces risk. If you can identify a phoney offer quickly, you save both time and money.

At Kandoo - a UK-based retail finance broker - we focus on connecting customers with regulated lenders and clear, transparent offers. This guide explains how to spot red flags, check authorisation and navigate borrowing safely.

If a lender asks for a fee before you see a penny, stop and verify.

Who should read this

If you are considering a personal loan, a short-term credit product or any borrowing arranged online, this guide is for you. It is particularly relevant if you have recently received an unsolicited text, email or social media message promising guaranteed approval or fast cash. It will also help carers and family members supporting older adults, who are frequently targeted with impersonation scams and pressure tactics. Even confident borrowers can be caught off-guard by realistic documentation or fake comparison sites. By understanding how UK regulation works, what the FCA register shows and how brokers like Kandoo operate, you can make informed decisions and reduce exposure to fraud.

The essentials - terms you should know

• FCA authorisation - Permission granted to firms and individuals regulated in the UK. Check the register before engaging.

• Authorised push payment (APP) fraud - Scammers trick you into sending money yourself. Bank reimbursement rules apply in many cases.

• Loan fee fraud - Upfront payment demanded for a loan that never materialises.

• Unlicensed lender - A firm or individual providing credit without required FCA permissions.

• Credit broker - Matches borrowers with lenders. Reputable brokers are clear about fees and never demand payment to release a loan.

• APR - The annual cost of borrowing including interest and standard fees, helping you compare offers like for like.

• Cooling-off period - A legal window to withdraw from certain credit agreements.

• Scam impersonation - Criminals posing as the FCA, your bank, a broker or a recovery service to gain trust.

Your choices to borrow safely

1. Use a regulated broker or lender Choose firms listed on the FCA register. Expect transparent terms, no pressure and no upfront release fees.

2. Apply directly with your bank or building society Existing customer checks can speed decisions. You get clear documentation and established fraud protections.

3. Consider a credit union Community lenders may offer fair rates and flexible assessments, especially if your credit history is thin.

4. Explore employer or benefit-linked options Salary-deducted loans or budgeting advances can be safer than high-cost credit if available to you.

5. Use a reputable comparison site Verify the site operator on the FCA register. Compare APRs, total repayable amounts and eligibility criteria.

6. Improve your eligibility first Check your credit report, correct errors and reduce unsecured balances to access better rates.

7. If in difficulty, seek non-profit debt advice Advice charities can help negotiate with creditors and prevent risky borrowing from unregulated sources.

A credible offer is consistent, verifiable and free from pressure. If any step feels rushed or opaque, pause and check.

What it could cost - and what is at stake

Who is likely to qualify

Eligibility varies by lender, but most assess income stability, existing debts and credit history. A clean credit file, verified ID and proof of address usually speed up approval. If your history is thin or imperfect, regulated lenders may still consider your application with adjusted rates or lower limits. Older adults should take extra care, especially if approached out of the blue or asked to move money. If a firm claims to be the FCA or a recovery service demanding payment upfront, it is almost certainly a scam. Borrowers should avoid unlicensed lenders entirely. If you have struggled to secure mainstream credit, a credit union or employer-linked scheme can be safer alternatives than turning to loan sharks promoted on social media.

From search to funds - the safe sequence

1. Identify need and budget - decide affordable monthly amount.

2. Verify firms - check FCA register entries match contact details.

3. Compare offers - focus on APR and total repayable.

4. Apply securely - use official websites with HTTPS.

5. Provide documents - pay slips, ID and address evidence.

6. Review agreement - confirm fees and cooling-off rights.

7. Receive funds - never pay to release the loan.

8. Repay on schedule - set up a direct debit reminder.

Benefits and drawbacks at a glance

Red flags you should not ignore

Scammers exploit urgency and trust. Many impersonate the FCA, your bank or a broker and promise easy approval if you act immediately. Another common tactic is loan fee fraud - a demand for an upfront payment to secure or release funds. Legitimate lenders do not ask for a transfer before you receive your loan. If you are told to move money to a safe account, that is a hallmark of APP fraud. Be particularly wary if you are over 61 or supporting someone who is, as data shows this group is frequently targeted. While authorities disrupted dozens of organised groups and secured convictions in 2025, fraud levels remain stubbornly high. Your best defence is verification. Confirm a firm’s permissions on the FCA register, and cross-check phone numbers and web domains. If anything feels off, stop and seek advice.

Safer alternatives when credit is tight

1. Talk to your bank about a temporary overdraft with a clear plan to reduce it.

2. Approach a local credit union for a small, affordable loan.

3. Explore employer salary advances or payroll-linked loans where available.

4. Use government-backed budgeting support or benefits if eligible.

5. Speak to a free, non-profit debt adviser before taking on new credit.

Frequently asked questions

Q: How do I check if a lender is genuine? A: Use the FCA register to confirm the firm’s permissions and contact details. Only use the details listed there, not those sent in unsolicited messages.

Q: Is paying an upfront fee ever legitimate? A: Upfront release fees for a loan are a major red flag. Most regulated lenders do not require fees before funds are disbursed.

Q: What if I am told to transfer money to a safe account? A: This is a classic APP fraud tactic. Contact your bank using the official number and do not move funds.

Q: Who is most at risk of loan scams? A: Older adults and people seeking quick credit are frequently targeted. Impersonation scams using the FCA’s name are increasingly common.

Q: Can I recover money after being scammed? A: Act fast. Contact your bank, report to your local police and the FCA. Reimbursement for APP fraud depends on circumstances and scheme eligibility.

Q: Are social media loan offers safe? A: Treat them with caution. Illegal money lenders use social platforms. Verify the lender and avoid engaging via direct messages.

What to do next

If you need a loan, take a breath and verify before you apply. Check the FCA register, compare APRs and total repayable amounts, and use only official channels. As a UK-based broker, Kandoo works with regulated lenders and never asks for upfront fees to release funds. If an offer looks too good to be true, it likely is. When in doubt, seek independent advice before proceeding.

Important notice

This guide is for general information only and is not financial advice. Always check FCA authorisation and read your agreement before committing. If you suspect a scam, contact your bank immediately and report it to the relevant UK authorities.