Borrowing money can push you out of your financial comfort zone. You must complete applications and rearrange your budget, trusting you can repay what you borrow months later.
With all this going on, the last thing you need is to worry about getting scammed.
Unfortunately, this fear isn’t unfounded. Scammers trick people out of money all the time.
New data from the Federal Trade Commission shows fraud increased by 30 percent in 2022, costing consumers $8.8 billion.
Scams might be on the rise, but you don’t have to become a victim. Scammers exhibit tell-tale signs that they don’t have your financial interest at heart.
Once you know how to read these signs, you can focus on finding legitimate online loans that you can trust.
Here’s what you need to know.
What Are Legitimate Online Loans?
The website MoneyKey describes legitimate online loans as personal loans provided by reputable financial institutions that follow all state and federal laws.
The U.S. has a large tapestry of federal and state laws that protect your rights as a borrower. They’re in place to prevent unfair and discriminatory lending practices.
By following these laws, legitimate lenders provide practical financial products to help borrowers handle unexpected emergencies.
While you still must vet legitimate lenders and compare rates to ensure you can afford their loans, you can trust this basic intention.
What Are Online Loan Scams?
Online scams, on the other hand, have no intention to help you out of a financial bind.
Instead, these scam organizations pretend to be genuine lenders in hopes you’ll give them your financial information.
Some scammers may even pose as an existing brand that you trust to get this information out of you.
Why do they want your personal information? The details you share in an online loan application include contact details, bank account info, and your social security number.
With this information at hand, scammers can break into your personal accounts and open new cash advances in your name.
What Are The Signs of A Scam?
These basic online financial literacy tips can help you spot the scam right away:
- The loan comes with upfront fees to release your funds.
- You can’t find the posted APR (Annual Percentage Rate) before you accept the offer.
- The lender pressures you into a contract or uses abusive language.
- A familiar brand has an unusual URL or email domain name.
- The lender insists you make payments using gift cards and money transfers.
- Official emails include links to suspicious websites.
- The promise of guaranteed approval or debt cancellation.
- Spelling errors, grammatical mistakes, inconsistencies, and contradictions on their website.
- Website lacks basic security features, like a closed padlock.
- The lender calls you to make an unsolicited offer.
- You can’t find contact information.
How To Find Legitimate Online Loans
The list above helps you spot scams to avoid. But what about finding legitimate loans you can trust? Here are some things to keep in mind.
1. Check The Lender Is Licensed
Only lenders that prove they follow state and federal lender laws can be awarded a license to lend in a particular state.
If you can’t find this accreditation anywhere on their site, consider looking elsewhere.
2. Assess A Lender’s Online Presence
Now’s the time to be judgmental; you want to take stock of a lender’s digital presence to see if they’re really who they say they are.
You want to pay close attention to their website. Trust your first impression — if there are broken links or the design looks cheap or otherwise “off,” it could be a scam.
If the site looks good, move on to what they’re saying. Do they provide helpful information without spelling or grammatical errors, or is it riddled with mistakes and broken English?
Legitimate lenders will have a communications team whose entire job is to make sure this content is easy to understand. Any confusion here is another red flag.
3. Expect Transparent Pricing
You can’t make any decisions regarding a loan until you know exactly how much it will cost you.
Legitimate lenders make this information freely available on their website long before you fill out an application. These details should include:
- Annual percentage rate (APR)
- Finance charges and other fees
- Potential loan amounts
- Approximate loan term, including payment frequency and amounts
- Approximate funding timeline
Legitimate lenders lay out the full cost of your loan in exacting detail.
You should be able to find this information easily on their website long before you fill out an application.
No scammer cares about your cybersecurity. In fact, they’re agents against your online privacy.
By comparison, legitimate lenders will have a broad policy showing how they intend to use, store, protect, and dispose of your information.
You don’t have to be afraid of scams when you know what to look for. Remember these guide as you compare rates and terms.
The tips you learned here today can help you identify scams and legitimate online loans alike!