Brits looking to borrow money should beware of companies who request an upfront fee in order to arrange a personal loan, a charity warns.

Citizen's Advice says that more people are falling foul of scams in which unscrupulous loans companies demand money upfront for a loan which fails to materialise.

Many lose their arrangement fee and for those who receive their loan, it is often less than the agreed amount but charges a higher rate of interest.

The loan companies often target those on a low income who have poor credit ratings and have difficulty securing a loan from other sources.

Those who respond to adverts in local papers or on the internet or receive calls from representatives are asked to send their bank details and an arrangement fee to apply for a loan of up to £10,000.

But if the loan does not arrive then borrowers are given a premium rate phone number to call which usually does little more than leave them further out of pocket, according to Citizen's Advice.

Peter Tutton, social policy officer, at Citizen's Advice said: "These conmen prey on vulnerable individuals and promise them a low-interest loan as an easy solution to their money problems. Unfortunately in most cases there is no loan and this is just a front for scammers looking to make a quick buck.

"The problem is that once people have sent off their money it is very difficult to get it back. We want to see measures in the Consumer Credit bill to give people a way of putting things right if they get duped into paying for a loan they will never receive.

"If the loan advertisements do not mention an arrangement fee but suddenly request a fee on application, be very wary. If you are asked for an advance payment alarm bells should ring - avoid at all costs firms who ask for money up front."

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