How to Avoid Shady Online Loan Providers
With the internet becoming a household necessity, running errands and getting things done have become easier and more convenient. From online shopping, paying bills, ordering food, everything’s possible with just one click. Even borrowing money is possible. However, when applying for a loan online, the stakes are higher.
Online lending platforms have grown considerably in the past few years to answer the growing demand for accessible loans. But the red flag of borrowing money online is that you need to give personal details to a party or to someone you barely know. It’s quite risky given the fact that loan scams and shady loan offers are rampant nowadays.
What Every Borrower Needs to Know
The safest way to borrow online is to keep an eye out for red flags and make sure you’re dealing with a credible lender.
If you’re resolved to borrowing money online, there are two significant risks you need to be aware of.
- It’s a real risk to lose money. Fraudsters can easily set up shop, charge fees, and promise the world for approving your loan. In the end, you will not get what you paid for.
- You’ll pay too much. You might end up paying big in interest and fees to a deceptive lender, costing you thousands of dollars, which is more than what’s necessary. Legit and reputable lenders will offer the same loan for a more affordable rate.
It happens when you give your personal details to a website that doesn’t entirely protect your identity, or when you give your personal information to identity thieves.
The information commonly found on loan applications are vulnerable to the prying eyes of thieves. Your date of birth, Social Security Number, home address, and phone number are just some of the information they might steal.
You already lose when you wasted your time dealing with all of the applications and follow-ups and trying to borrow from a fake lender. Thus, be extra prudent.
Watch Out for Red Flags
Sometimes, con artists make the mistake of giving themselves away. As such, when you start communicating with lenders, observe how they operate and present themselves before you give your money and personal information.
Look for a different lender if you see any of the red flags below.
Take heed that legitimate lenders don’t ask for upfront fees. Thieves and scammers commonly use “advance-fee scam” and will explain that you have to pay a certain fee so they can process your loan application.
While there are legitimate loans that require money for the application, they are usually for big loans like home loans. Such loans will require the borrower to pay for an appraisal, a credit check, and so on. Also, these fees will be thoroughly explained on official disclosure documents. If you’re applying for an auto loan or personal loan, such fees should be non-existent.
If you paid for some fees already, expect them to keep asking for “one last” fee to you until you catch on.
Lenders don’t do business just to lose money. With that, they don’t give guarantees that they’ll lend money to just about anyone. Although there are lenders who are willing to bite more risk than others, they still need to be sensible and check about your finances.
If you have no income, no assets to use as collateral, or you have a bad or no credit history, a lender will hardly lend you funds. Otherwise, how can they get their money back? If it’s just too good to be true, then it probably is.
Lenders who approve anyone’s loan applications often sound smarter than they do. They have ways to gain high profits as a return for taking big risks, which could mean they steal data or money, or you’re going to pay a lot.
Request for Funds Through Payment Services or Wire
You’re trying to get money when you’re applying for a loan, so why do you have to send money? Again, there are loans that require legitimate fees, but you can pay them with a credit card or check.
If a lender will ask for payment through a wire or instant payment services such as MoneyGram or Western Union, it’s definitely a scam. Your money will be gone for good once you send funds, and it’s going to be impossible to track the receiver.
Further, a lender who accepts checks for payment will need a clean bank account for deposits, that of which can be easily found by law enforcement. Be informed that credit card processors will quickly shut down vendors with too many complaints.
Unprofessional Service and Sales
Banks may not be known for their fuzzy and warm interaction, but with them, you will not get a sense that you deal with a fly-by-night operation.
A lender’s site that’s full of misspelled copies, security errors, and other inconsistencies is an indication that you deal with scammers. Moreover, pay attention to how the sales staff speaks with you, high-pressure and abusive behavior are clear warning signals of what’s to come.
The Name Game
For businesses that deal with money, first impressions are as important. But for scammers with nothing authentic to offer, they will use confusing names or choose official-sounding names.
For instance, the lender might use the word “Federal,” but it doesn’t mean the U.S. government supports or endorses the lender. Imitating the name of a large bank is another obvious tactic.
Beware of Dangerous Loans
Apart from being vigilant with the lenders, it’s also important to be wary with the loan offers online. There are loans that aren’t worth the risks no matter who the lenders are, and it’s easy to spot them online.
Such loans can send you to a debt spiral and may put you in a worse position than where you currently stand.
For instance, auto title loans and payday loans are known for their expensive fees, which could amount to triple-digit interest rates.
These are lenders who are not supposed to operate in your state. But since they’re lawbreakers, they can collect fees and offer loans from just about anywhere on the planet.
To avoid falling into the hands of these shams, check the regulator of your state to verify if a certain lender has the authorization to do business in your place. Legitimate lenders don’t let their licenses lapse or forget to register. You’ll have little or no legal recourse in case you have a dispute with a lender overseas.
Illegal lenders take advantage of those who don’t have many options or of individuals who are desperate to borrow money. Their common practices may include:
- Rolling over or repaying high-fee loans more often than what’s allowed in your state. The borrower will pay another fee whenever it happens, which increases the debt load over time.
- Bypassing debt-collection laws that curb how lenders can collect defaulted or unpaid loans.
- Including products like disability or life insurance into your loan without your consent.
- Imposing higher interest rates than what’s allowable in your state.
- Information Gatherers and Sellers
Beware also while searching for online lenders, you might find businesses whose slogans shout “we don’t lend money” to site visitors. Such web has lead generation sites which could sell your personal details to lenders.
Lead Generators are Experts in Marketing
Lead generators will help you look for people or parties who are willing to lend you funds. Some big websites do this maneuver and present a valuable service while earning little per loan. But with shadier operations, it may create problems.
Be cautious when giving out personal information to websites that guarantee you to shop the competition as they might sell your contact information to predatory lenders, or identity thieves who will continuously try to scam you.
Be a Wise Borrower
As a borrower, make it a practice to borrow only what you can afford to pay. The lenders may be willing to lend you the largest amount possible, but it doesn’t mean you have to borrow the maximum.
Besides, it’s not really a good idea to do so. You never know what surprises may come in the future even if you can afford the payments.
All online lenders are expected to be completely legitimate and above the board. Unfortunately, scam or fake online lenders now resides on the internet, and you need to avoid them at all costs.
Besides the obvious scammers, be vigilant with legitimate lenders too as some will try to squeeze you by offering bad loan conditions and terms like hidden fees, inflexible repayment options, and excessive APRs. Fortunately, you can more easily identify sketchy online lenders by being aware of the following red flags given above.
The above blog was received from a recent contributor. We wanted to share with everyone since it has some good points to keep in mind when trying to find trustworthy online lenders like America’s Loan Company. It is quite sad that there are so many ruthless people trying to steal and that they are able to do it so easily. America’s Loan Company does not recommend or discourage the use of any other lenders named in this blog. The point is to share the basic suggestions on how to avoid online scams. Our thanks to the contributor, Tiffany Wagner.
Tiffany Wagner is a full-time writer and contributor for various websites on topics about Credit Score Trends, Banking, finance, and real estate are her favorite go-to subjects to tackle. She’s also a big stock market hobbyist and likes to spend her free time crunching data and numbers. Whenever she has free time, Tiffany cozies up on her favorite cafe and play Sudoku.