As personal loans increase, so do personal loan scams. Be sure to follow these tips on how to examine personal loan lenders before applying for a loan. (iStock)
Personal loans have increased dramatically in the past five years. And with the financial difficulties that many faced during the pandemic, personal loans are a more important financial tool than ever.
Unfortunately, this increase in the number of loans brought with it an increase in scams. Financial sector fraud is not a new trend. According to data from the Federal Trade Commission, consumers lost more than $ 1.9 billion in fraud in 2019. Given the other economic challenges that people are facing now, it is more important than ever that people are able to recognize the signs of a personal loan check.
How do you look for a personal loan?
When you are looking for a lender for personal loans, you should examine potential lenders and make sure that the companies you are considering doing business with are reputable and reliable.
Credible online market is a great place to start. With Credible, you can compare rates and creditors in one window – plus, it’s 100% free!
5 things to do before choosing a personal loan lender
However, before you fall into a lender, you will want to follow this simple checklist to save time and money. Here are five things you must do before applying for a personal loan.
- Look for information about the lender
- Make sure your site is legitimate
- Read reviews online
- Use government tools to verify
- Buy and compare loan rates
1. Look for information about the lender
Before handing over your confidential information to a company, do some research. The company’s website is a good place to start. Most legitimate creditors include information about the company, leadership licenses and more. You can also use an Internet search to see what information is available on other websites. If there is not much information, it can be a bad sign.
Check out Credible’s partner creditors below. Simply enter the desired loan amounts and estimated credit score to get started.
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2. Check that the address and website are legitimate
You can say a lot about a company’s legitimacy on its website. First, financial companies, like personal loan lenders, need to store a lot of confidential information. If they do not have a secure website, their personal data may not be secure.
You can also confirm that the address listed on the website is legitimate. If there is no website listed, it is probably a bad sign. Trusted companies generally publish their contact information for the benefit of customers and government agencies.
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3. Read the reviews online
Online resources make it easier for consumers to read other customers’ reviews before choosing a personal loan lender. Nonprofits, such as the Better Business Bureau, track complaints and classify companies based on ethics as they treat customers.
You can also read Credible’s complete reviews on its personal loan partners. Credible personally examined each creditor to make the process easier for you.
4. Use government tools to verify
Creditors must register in each state where they operate. Your state’s financial agency can confirm that a particular company is registered in your state. You can also examine creditors looking for complaints or charges from or filed with the Federal Trade Commission and the Consumer Financial Protection Bureau.
5. Buy and compare loan rates
When you are looking for a personal loan, it is important to research the best loan rates and lenders available. Using a trusted source like Credible, you can find a list of legitimate lenders, find the best interest rates, and use a personal loan calculator to see how much you can expect to pay.
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5 warning signs of a personal loan scam
Do not fall victim to a personal loan scam. These five warning signs can help you recognize and prevent fraud.
- The lender guarantees the approval of the loan
- No credit check
- The creditor requires an advance payment
- There is little information about the company
- The lender contacts you directly
1. The lender guarantees the approval of the loan
If a creditor guarantees approval without an application, it is probably too good to be true. Lenders usually check the borrower’s income, debt / income ratio and credit score before offering a loan. The promise of guaranteed approval can be a sign of fraud.
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2. There is no credit check
Performing a credit check is a way for financial institutions to manage risk. Without a credit check, they have no way of knowing whether they are lending to a high-risk borrower. And if a lender is not concerned with the risk, there is probably a reason. It may be a sign that the transaction is a fraud or that a predatory interest rate is being offered.
3. The creditor demands an advance payment
Some fraudulent lenders ask for payment in advance, but never deliver the actual loan. If you are working with a legitimate company, you will never have to hand over money until the loan agreement is signed. Some lenders require origination fees on loans, but they are not paid in advance. Instead, your origination fee must come out of the loan proceeds or be included in the loan.
4. There is little information about the company
Most reputable companies share a lot of information about their history, mission and corporate leadership directly on their website. Perhaps most importantly, it is easy to find information about a company elsewhere. If financial publications and consumer protection agencies are not familiar with the company, it may be a sign that it is not legitimate.
5. The lender contacts you directly
It is likely to be a warning sign if a company proactively contacts you with a loan offer. While some companies use email and email marketing as a way to promote their loan services, these are mass marketing efforts. Probably, a direct call from a creditor is a sign of fraud.
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