Unlike in the old days, you no longer have to head over to the nearest bank to see about securing a personal loan. Thanks to the internet and digital technology, online loans are readily available to consumers. While plenty of legitimate loans are available, plenty of others are a bit riskier. The trick to securing a dependable online loan is working with a reliable lender, so it pays to do your homework. Learn more about identifying shady online lenders by reading on below.
Beware of Shady Online Lenders
In a perfect world, all online lenders would be above board and completely legitimate. Unfortunately, however, fake or scam online lenders abound on the internet. Naturally, you’ll want to avoid those at all costs. Scams aren’t all that you need to watch out for; many legitimate lenders try to squeeze every possible dime out of consumers by offering bad terms and conditions, including excessive APRs, hidden fees and inflexible repayment options.
5 Red Flags to Watch Out for when Looking for Online Loans
Even if you are a fairly savvy person, it’s surprisingly easy to be taken advantage of when seeking online personal loans. The main problem is that such situations are usually somewhat urgent, so people tend to rush and apply for loans without doing any real research. By being aware of the following red flags, you can more easily identify sketchy online lenders:
- Credit Checks – Legitimate online lenders always perform credit checks. Some begin with so-called “soft” credit checks, which aren’t reported to the credit bureaus. Once you’ve accepted the terms, a “hard” check is performed before the loan is approved. Steer clear of online lenders that don’t perform credit checks because they are mitigating the extra risk by charging exorbitant APRs and fees, so you will end up paying dearly.
- Secure Site – A definitive sign of a scam online lender is one whose website lacks crucial security features. Since online lenders deal with highly sensitive financial and personal information, they must provide a secure environment. The URL for their site should begin with “HTTPS” in the browser bar rather than HTTP. You should also see a small lock symbol on the address bar. Look for verification that they have a valid security encryption certificate too, as they do expire.
- Reviews and Complaints – A quick and easy way to get a feel for how legitimate an online lender is is by searching for reviews and complaints on the internet. Start with the Better Business Bureau. Another excellent resource is the complaint database that is operated by the Consumer Financial Protection Bureau. Search for the lender on the FTC’s Scam Alerts website as well. Finally, just perform a basic online search to see what pops up.
- Automatic Withdrawals – Beware of online lenders that require you to allow them to automatically withdraw payments from your bank account. By law, no lenders can require this. They can, however, charge additional fees if you choose to make your payments manually. Stick with lenders that offer a variety of payment options. After all, if you give a lender unfettered access to your bank account, you could live to regret it.
- The Fine Print – Make sure that the terms and conditions of your online loan are crystal clear before signing off on it. This includes scouring the fine print to check for information about the APR and any fees that may be assessed. Many lenders charge origination fees to cover their costs or to match consumers with investors who can fund their loans. However, origination fees should be included right in the APR. Don’t take online loans that require extras like credit insurance, as this is just a money grab.
No one likes having to take out loans, but most people find themselves in that position at one point or another. If it happens to you, don’t let the stress of the situation force you into a rash decision. Carefully consider the many available options, and thoroughly investigate all online lenders before doing business with them. People successfully take out legitimate online loans every day, and you can too as long as you are careful.