If you’re starting a new life or expanding your business, getting a loan will be more of a necessity than an option. The fastest and most convenient way to get one is through online loans. Especially if you don’t have good credit scores, a wide selection of lenders won’t be available and online loans can be your best option. Since there’s a wide variety of online lenders, it’s critical to know how to check if they’re legitimate.Getting online loans can be a challenging task if you’re new to this concept, but through diligent efforts, you’ll find authentic online loan lenders. This article discusses essential tips to guide you through the process.
What Is An Online Loan?
As the name suggests, online loans are those you can apply for and acquire through the internet. It means that you can access it anywhere and anytime as long as you have a PC, laptop, smartphone, and a stable internet connection. The entire procedure takes place online, from the application to the disbursement of funds. To further familiarize yourself with online loans, here’s a quick guide to give you an idea of the whole process:
The first thing you need to do is visit a lender’s website. Then, you need to fill out an application online. All documents and IDs should be uploaded in the form as well.
Afterward, the online lender may conduct their background and credit checks to evaluate you as a creditor. Based on this, they'll inform you if you’re approved or not.
If your application has been approved, the online lender would deposit the loan funds directly into your designated bank account. When your due date arrives, lenders will usually automatically debit the money from that bank account.
How Do You Check The Legitimacy Of An Online Loan Lender?
Because you're providing online lenders with your personal information and access to your bank account, you need to make sure you’re going into a transaction with legitimate lenders.
There are many scammers online, and you shouldn’t fall victim to fraudulent ones. Fortunately, you’ve several ways at your disposal to check whether an online lender is legitimate. These are the following:
1. Check Out Reviews And Comments Online
There are numerous benefits to borrowing loans online, but you still need to be vigilant when you dabble into online loans. One way to check for the legitimacy of a lender is to read online reviews and navigate through various online resources. If a customer is unsatisfied with their services, you’ll likely see some posts regarding their complaints. Negative reviews should raise red flags and prompt you to dig deeper into an online loan provider’s legitimacy. Reddit is an online community where you can also get honest opinions from people getting online loans. You can check this out to get recommendations from people who’ve already experienced availing of online loans.Another sign that an online loan provider is illegitimate is the absence of reviews. If you aren’t able to see any reviews, good or bad, the online loan provider might just be a fraud. If you’re in Canada, watch this video for a list of the best money loan apps that you can use:
2. Get Verification From The Better Business Bureau
Another way to check for the legitimacy of an online loan lender is by verifying it through the Better Business Bureau website. Lenders are graded from A+ to F on the BBB website. You can use this as a benchmark to assess the legitimacy of the online loan lender. A+ is the highest letter grade that an online lender can get, and F is the lowest.
3. Ask The State Attorney General
All online lenders are legally required to register with state agencies to start their lending business. If everything checks out with the attorney general, you can be sure that the online loan lender runs a legitimate business. On the other hand, if the attorney general doesn’t have any record of the lender in question, you should no longer entertain this lender. Lenders who aren’t registered with the attorney general are illegitimate.
4. Beware Of Common Ploys and Tactics
Fraudsters and scam artists have a playbook for ways to take advantage of seemingly unsuspecting clients. To protect yourself from these tricks, you need to know the common scams and red flags when it comes to illegitimate online loans. Here are some that you should be wary of:
Upfront Fee: One of the most common scams employed by illegitimate online loan lenders is asking for an upfront fee. If you encounter a lender requiring an upfront fee before processing your application, consider this a red flag. Don’t be fooled into thinking that paying an upfront fee will get you a better chance at having your loan approved. It’s a trap! This type of illegitimate lender might even disguise this as documentary or application fees, but don’t fall for it either. Legitimate online lenders will never ask you for an upfront payment. All prices are usually included into the cost of your loan. You might only need to pay for taxes when you borrow money.
Errors: As they say, the devil is in the details. When it comes to online loans, you need to pay attention to the information on the website or application forms. Coming across basic errors involving capitalization, spelling, grammar, or punctuation are signs that this lender lacks professionalism. It may also be an indication that the online lender is a scam.
No Requirement Of Credit History: Lenders will always check your credit history and background before lending you money to ensure your creditworthiness. A legitimate lender will even be interested in your credit card history. If you come across an online lender claiming they don’t check the credit history, that’s also a red flag. Don’t fall into the trap of lenders claiming that bad credit is not a problem to them.
5. Get Recommendations From Your Friends And Family Members
A trusted source you can refer to are your friends and family who have availed of online loan services before. If your friends and family members have already tried borrowing money online, ask them for their recommendations. You can learn about good online loan lenders they’ve already worked with. You can also get more valuable tips from them when you start applying.
6. Check If The Lender Uses Unconventional Communication Channels
Another way to spot illegitimate lenders is through the channels they use to reach out to you. Reputable lenders will always converse with you through email and have legally drafted contracts ready. If you get offers over the phone or through door-to-door solicitations, you need to be on your guard. It’s illegal to solicit or offer loans over the phone. A reputable and legitimate lender will never contact you over the phone or through door-to-door schemes.
7. See If The Website Is Secure
Another way to check for the legitimacy of an online lender is to see whether their website is secure. To be a legitimate lender, you need to have a secure website. A secure site would usually have a padlock symbol whenever you’re asked to give personal information. On the other hand, URLs that begin with “https” instead of “http” are secure. The additional “s” actually stands for security. Legitimate online lenders have various safety measures and ways to spot inauthentic ones, and prevent identity theft. If these safety measures are lacking, it means that the online loan lender is not concerned about its integrity and security. Not having these guards up will leave you exposed to cybersecurity risks. Hence, you need to be extra careful while assessing online lenders.
8. The Lender Lacks A Physical Address
Even though the process for application until the disbursement of funds is carried out online, an online loan lender still needs to have a physical office. Legitimate lenders will always provide a physical location where you can reach them. If you don't find an address, you should avoid this lender because they may be illegitimate. It’s also essential to check out the address written on the website. If you check it out on Google Maps and it shows up as an empty lot, it’s another sign that the lender is illegitimate.
9. You’re Pressured With A Deadline
You might have already encountered ads where lenders give you a deadline for an offer that expires in a few hours or days. Don’t fall for this trick wherein illegitimate lenders play upon this sense of fabricated urgency to force you into making impulsive decisions. Don’t be pressured into taking a loan. Instead, take time to think about it. Legitimate lenders will never pressure you into getting one.
Online loans can indeed be a very convenient way to get cash when you need it instantly. However, you must perform your due diligence to check if the lender is reputable and safe. Do your homework first before considering an online loan lender. All the resources you need to verify are at your disposal, so it’s just a matter of taking practical steps. Remember that it’s always better to be safe than sorry.