There has been more than a 50% rise in the number of complaints about loan scams in the past year, according to the Office of Fair Trading (OFT).
The majority of complaints were to do with credit applications where customers had sent upfront fees through money transfer companies before receiving a loan.
In most cases customers had then received an unsuitable loan – or no loan at all.
The number of complaint calls received by Consumer Direct - the OFT’s advice service - increased by 1,108 between 1 July 2010 to 30 June 2011 compared with the same period in the previous year when 2,059 complaints about loans were made.
The OFT warns consumers never to pay fees before receiving a loan.
Customers should also be wary of businesses asking for money to be wired before a loan is granted or companies that do not first ask to see a customer’s credit history.
David Fisher, director of the OFT, says: "We advise people to check out the company carefully before agreeing to anything, including asking for a landline number, a physical address and doing a search about the company online, as well as checking that it has a valid credit licence."
Are you worried you’ve been scammed? Check out our 10 ways to protect your ID.