Fraudulent loan companies are happy to take your money, if you're willing to take the bait for a "guaranteed" loan.

The vast majority of lending institutions are legitimate. But a bad apple spoils the bunch, as the saying goes, and one fraudulent loan broker can take hundreds of unsuspecting consumers to the cleaners before getting caught. Fortunately, you can steer clear of the most common scams by understanding how the racket is played. One favorite scam is the advance-fee loan, where a seemingly legitimate company guarantees your loan, regardless of your credit history, as long as you pay a fee upfront as high as several hundred dollars. Sound too good to be true? It is. They take your money and run.

Here's how to recognize this scam. An advertisement or promotion says it will guarantee or promise approval for a loan but to take advantage of it, you must first pay a fee. For personal loans, it can be several hundred dollars while small businesses can be charged several thousand. Unfortunately, advertising in recognized media outlets or on the Internet does not guarantee the legitimacy of the company behind the ad. These ads can appear in the classified section of local and national newspapers and magazines, radio advertisements, local cable stations, and even on flyers circulated in neighborhoods, shopping centers and at military bases. Often, these ads feature "900" numbers which result in the first rip-off: charges on your phone bill, or they offer toll-free "800" numbers.

Legitimate lenders may guarantee firm offers of credit to consumers but rarely before evaluating your creditworthiness. Remember that a bona fide offer of credit does not require payments up front. While legitimate lenders may require consumers to pay application, appraisal or credit report fees, these fees are not usually required before the lender is identified and the application completed. In addition, the fees generally are paid to the lender. Be highly skeptical if the money goes directly to the broker or arranger of the "guaranteed" loan.

Fortunately, federal laws are clear about what you can and cannot do when marketing to consumers in this area. According to the Telemarketing Sales Rule, if someone guarantees or suggests they can arrange a loan or credit for you with few questions asked, it's against the law to ask you to pay - or for them to accept payment - for the service until you actually get your loan or credit. Never give your credit card account number, bank account information, or Social Security Number over the telephone or Internet unless you are familiar with the company and know why the information is necessary. If you don't have the offer in hand or confirmed in writing and you are asked to pay, don't do it. It's fraud and it's against the law.

If you think you've been a victim of an advance-fee loan scam, contact your local consumer protection agency, state Attorney General or local Better Business Bureau (BBB) to report the company.

Sources used to create this article include the Federal Trade Commission, www.ftc.gov