Fraudsters have always been a big problem in the financial sector. Unfortunately, they keep thriving with the new technologies in this industry. The number of scam lenders has risen in the US in recent years, leading to many loan consumers losing millions of dollars each year.
No one is immune to these fraudsters; they’ve robbed the rich, the poor, and even multimillion-dollar corporations. However, with a discerning eye and some sound reasoning, you will manage to escape most of their traps.
This article has compiled a list of the things you should look into when evaluating a safe lender to borrow from.
How to Evaluate Whether or Not a Loan Website Is Safe to Use
1. The Lender’s Attitude Towards Your Credit History
Most reputable loan lenders warn their clients that they’ll thoroughly look into their credit history when evaluating their loan applications. In some instances, they may contact all three credit bureaus—TransUnion, Equifax, and Experian—to get a borrower’s credit report. Lenders use these reports to determine whether you usually pay your debts on time.
On the other hand, most fraudulent lenders are not interested in their customers’ creditworthiness. Instead, they often intend to take advantage of high-risk borrowers who will probably miss paying the loans on time and be penalized.
However, a few reputable loan lenders provide bad credit loans. But they’ll consider other factors, such as the borrower’s employment, income, and education when evaluating their applications.
Takeaway: conduct thorough research to ensure that you’re borrowing from a lender interested in your credit background.
2. Confirm if the Lender is Registered to Operate in Your State
The Federal Trade Commission requires that all loan brokers and lending firms register in all the states they operate. Visit the lender’s site to confirm the states where they’re legally permitted to do business. If a firm you’re considering doesn’t list the states it’s permitted to operate in; you’re probably dealing with scammers.
Takeaway: confirm if the lender you’re considering working with is registered to do business in your state before sending your details.
3. The Lender Demands a Prepaid Card
Some con artists demand gift cards and prepaid debit cards from their borrowers, alleging that they are required for loan security, which is a huge red flag for a scam. Genuine financial organizations may impose a charge for your loan application, assessment, or credit report. Nevertheless, these fees are compensated by your loan.
Takeaway: Things like gift cards, cryptocurrency, and prepaid debit cards are hard to trace, and you shouldn’t use them when applying for loans. Instead, you ask for direct deposits, wire transfers, or a check.
4. The Loan Offers Through Phone Calls or Emails
Be cautious if you receive a loan deal over the phone, in the mail, or through a door-to-door campaign. The FTC declares it illegal for firms to offer their loans through phone calls in the US.
Loan products such quick payday loans at Viva come with reliable customer support at all times.
Takeaway: Reputable lending firms do not target their perspectives over the phone or email. So, only consider lenders who market their products through traditional mass media and recommend online platforms.
5. Physical Address
Only consider lenders that have indicated their physical address on their sites. You can run the location through Google Maps to be sure. Some scammers may list vacant lot addresses to trick innocent customers into thinking they are reliable—so it’s crucial to confirm.
Takeaway: Never sign loan application forms before verifying that the lending firm has physical offices.
6. Lender Rushing You to Take Out a Loan Immediately?
Don’t give in to any form of pressure. Issuing an instant deadline to sign up for a loan to get an offer that expires shortly—like in less than a day—is one of the common characteristics of loan scams.
Lenders who employ such high-pressure techniques are often up to no good. It could be a hoax to encourage customers to make a hasty decision.
Takeaway: Stay away from such instant deadline offers. It would be best if you had days, or even weeks, to decide on whether to borrow or not.
7. The Transparency Of Charges
Scammer lenders avoid stating their fees on their sites, and others don’t even quote them when asked.
Firms imposing hidden charges after approving your loan is a clear red flag. The FTC recommends avoiding such companies, especially if they claim that the up-front cash is for insurance, processing, or paperwork.
Takeaway: Legitimate firms only impose fees for applications, appraisals, and credit reports. And they tell you about the fees even before applying for their loans.
Others may include:
- Copycat Names: Scammers use names that appear or sound like those of reputable firms to deceive customers into taking their loans.
- Poor reviews: Poor reviews indicate that the firm is not serving its customers to their satisfaction. Or worse, they are conning them.
- Customer Service: reputable lending firms offer various reliable means that you can use to reach them at any time. On the other hand, most scamming firms don’t have reliable customer service.
The bottom line
If you need a loan, do your homework and compare different lending firms to ensure that you are receiving a competitive rate from a reputable provider. Even if your credit isn’t perfect, many personal loan providers will lend to anyone in need, regardless of credit. Instead of being tricked into falling for scammers, look for lending companies ready to work with you right where you are.
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