Until recently, the only way to get your hands on a loan was to visit a physical bank, discuss with a loan expert, fill out the loan request forms, and wait for a verdict.
But in the internet age where everything is going virtual, borrowers prefer other alternatives, e.g., online loans.
Contemporary borrowers prefer online lending because:
- It is a fast and convenient way to borrow.
- Online loans have less strict underwriting procedures– some lend even to bad credit borrowers.
- They offer more flexible terms.
- Online business loans have low interest rates.
But online loans are not without blemishes. With little regulatory monitoring over these providers, it’s okay to question the safety of some of the loans they sell to customers.
An unsafe loan product can endanger your financial bottom line, threaten to ruin your credit score, and put you in an endless debt cycle. That’s why it’s crucial to vet a lender before committing to a deal.
So, is Online Borrowing Safe?
Yes, it is–there are myriad legitimate online lenders to borrow from. Such lenders strive to adhere to the same stringent lending guidelines as traditional banks.
But in the abundance of dedicated finance providers hides a few bad players. Luckily, these ripoffs are easy to identify if you know how to vet your lenders.
Tips to Confirm a Lender’s Legitimacy
Follow these steps to confirm a lender’s legitimacy:
1. Confirm their state license
The FTC requires that all lenders register in the states where they sell loans. If you doubt a company, ask the representative to show you a business registration number.
Alternatively, you can confirm this alone by entering the company’s name in a search engine preceded by the words “state license.”
2. Check out customer reviews in ranking platforms
Insights from ranking platforms can help you make informed borrowing decisions. The Better Business Bureau (BBB), for example, is a platform where customers air their experiences and grievances. The company then uses this feedback to rate brands. Other popular ranking platforms to look at include TrustPilot and Yelp.
3. Ask pals and siblings
You can also ask friends and siblings who’ve borrowed before. In particular, tell them to suggest lenders they’ve worked with previously and seek a brief explanation of the loan experience.
Final words
Bad players are easy to detect if you pay attention to the details and do plenty of research before committing.
In essence, any clever online search will give you the information you need. For instance, you can Google to see if the company has ever received bad press over allegations of personal loan scams. If you find anything fishy, consider a different lender.
Author Bio: Michael Hollis is a Detroit native who has helped hundreds of entrepreneurs with their Business Loans. He’s experimented with various occupations: computer programming, dog-training, accounting… But his favorite is the one he’s now doing — providing business funding for hard-working business owners across the country.