If you have decided to get a personal loan, a great place to start your search is on the internet. It is important to carefully evaluate the lender before you apply for a loan. While many online lenders are legitimate, there are also some fraudulent ones to watch out for.
Here are some tips to help with your search and avoid loan scams:
1) Select a state regulated lender. Check with your state Attorney General’s office or your state’s Department of Banking or Financial Regulation. Most states have websites to make this easy.
2) Check with the Better Business Bureau to see if your lender is accredited. You can also check to see if customers have filed complaints against the lender.
3) Be cautious if you receive unsolicited telephone calls or e-mails from lenders, and never give out your personal information if you have any doubts about the call. A good course of action is to hang up, check the lender’s own website for their phone number, and call them back directly.
4) Don’t use Craigslist to find a lender. Some fraudulent lenders have been known to use this site.
5) Don’t use a lender who asks you to pay up-front fees in order to get the loan. The vast majority of loan scams involve collection of payments in advance. Legitimate lenders will never ask you to pay up-front fees. To learn more about these loan scams, the FTC has a good web page on the subject:
Federal Trade Commission (link: http://www.ftc.gov/bcp/edu/pubs/consumer/telemarketing/tel16.shtm )
6) Do not use off-shore lenders. These lenders are based in foreign countries to avoid state and federal regulations. Many consumer protections may not apply to these loans.
7) Be aware of whether the lender is a “tribal” lender. These lenders are affiliated with American Indian tribes, which allows them to operate outside state regulations. As with off-shore lenders, you will have fewer protections under state and federal law. Most lenders will disclose if they are tribally owned in the footer of their website.
8) In your internet search, you may come across peer-to-peer lending sites. These lending sites match up individual lenders with individual borrowers. While these loans may be appropriate for some borrowers, they are not always available to consumers with lower credit scores. Also, consumer protection laws are murky because you are borrowing from another individual, not a state-regulated lender.
9) Be sure to check out the lender before you give them your personal information. Even if they don’t take your money now, they can take your identity.
10) Make sure that you understand the terms of your loan before you sign any documents. Read the fine print on the documents to ensure that the rates and terms have not changed. Unscrupulous lenders may use bait and switch tactics to lock you into higher rates and fees.
By following these guidelines, you should have no problem finding many legitimate on-line lenders willing to make you a personal loan. Be sure to compare the rates and terms to find the one that is best for you.
Briana Fabbri is a recognized “Emerging Leader” from the Chicago Association of Direct Marketing and currently blogs for NetCredit, an online personal loan provider. Briana frequently blogs about credit, loans, and other personal finance matters. Note: Ms. Fabbri and NetCredit do not provide financial advice. Please consult with a qualified financial advisor regarding your individual circumstances.