Ever since the lending world joined the web, the number of loans you has at your fingertips have multiplied—and with them, the number of loan scams has grown, too.
As a borrower, you can’t be too careful when applying for a loan online. You need to share a lot of personal information in an application before a lender is willing to approve you. In the wrong hands, your info can be used by fraudsters who assume your identity. They can open payday loans or cash advances pretending to be you without intending to any of them back.
Luckily, legitimate lenders outnumber the scams by a large margin. But to hedge your bets, you should know how to spot a legitimate option so you can avoid getting scammed.
Conduct Thorough Research
Before you fill out an application, conduct a background check of a lender to assess its credibility. Start by verifying the company’s website, searching for customer reviews, and exploring its online presence.
Beware of these red flags. They could indicate you’ve taken a wrong turn on the web:
- An overwhelming number of bad reviews and negative feedback
- Glitchy and suspicious website design
- Spelling errors and grammar mistakes
On the flip side, legitimate loan companies will have a professional website and positive customer reviews.
Check for Licensing
Licensing is the gold standard of legitimate online loan companies. Reputable lenders must register with their local financial authorities to provide loans in their area.
Look for information about the company’s licensing status on its website; it should be easy to find. A lender like Fora lists its licensing numbers right on its homepage. That way, you can confirm its registration before you compare online loans from Fora Credit.
Why is licensing so important? It ensures that the loan company operates within legal boundaries and adheres to industry standards.
Verify Contact Information
A legitimate loan company will have a physical address and readily available contact information—even if they complete the entire lending process over the web.
Verify the address provided on the company’s website and cross-reference it with online mapping services. Additionally, legitimate lenders will have multiple communication channels such as phone numbers, email addresses, and even in-browser chats.
Transparent Terms and Conditions
Your terms and conditions (that is, the contract you sign before receiving your funds) could be another clue of legitimacy. Legitimate lenders want you to understand your full rights and responsibilities as a borrower, so they write these terms in easy-to-understand language. Your contract should clearly state interest rates, repayment schedules, fees, and any other relevant terms.
If the terms and conditions are vague, incomplete, or contain unfavorable clauses, it may be a warning sign that the loan company is not trustworthy.
Secure Online Presence
As the rate of financial fraud rises, it’s a legitimate loan company’s duty to prioritize its online platform security. Look for these security green flags:
- Secure website connection (HTTPS)
- Privacy policy
- Data encryption measures
These features protect your personal and financial information from outside actors trying to hack your profile.
Avoid Upfront Fees or Requests for Payment
Beware of loan companies that ask for upfront fees or payments before providing the loan. Legitimate lenders typically deduct fees and charges from the loan amount or add them to the repayment plan.
If a loan company insists on upfront fees or requests payment through unconventional methods, it is likely a scam. After all, you’re borrowing money because you don’t have enough of it to handle an urgent expense. How can you pay money to release your funds?
Bottom Line
Due diligence should be the borrower’s creed. Always research your lender thoroughly before applying, verifying they have licensing and contact information, transparent terms and conditions, and a secure online presence. With these features in place, a lender is probably legitimate and a safe bet in your emergency.