The internet makes everything easier. You can consider yourself a technology expert and be comfortable doing things online from ordering a pizza to paying your bills. But the stakes are higher when you apply for an online loan because you need to provide confidential information to someone you may not know and you are probably talking about a relatively large amount of money.
The safest way to make loans online is to make sure that you are dealing with a reputable lender and to watch out for red flags. There are two big risks when lending money online.
Losing money is a real risk: fake creditors can easily settle down, promise you worlds and funds, and charge fees for approving a loan. Lastly, you do not get what you paid for.
Paying too much: Even if you get a loan, you could end up paying a lot of fees and interest to a bad creditor, and end up spending thousands more than necessary. Reputable lenders will give you the same loan for less.
Identity theft happens when you give your Payday information to identity thieves, or it provides you with a website that does not adequately protect your information (even if it does not collect information with intent to steal your identity). Items commonly found in loan applications are very useful for stealing your identity such as your CPF number, date of birth, current and previous addresses, etc.
You can also argue that you lose when you waste your time trying to borrow from a fake lender and spend even more time dealing with all the applications and follow-ups.
But what should I do then to avoid these risks?
Be careful when taking out a loan online as you may end up falling in a scam. (Photo: disclosure)
Dealing with a legitimate and reputable lender will prevent most problems. Always research the lenders you are considering using and read the positive and negative reviews on customer complaint sites and reputable financial news sites. Remember that everything on the internet is not true and you may be reading employee ratings or crooks. It is safer to borrow from a lender you have heard of from a trusted source such as a banker or a specialist publication. Also check with the Central Bank if the institution is authorized to act by making loans.
Reliable references come from sources you know are not just shills to a lender. Ask your friends and family where they borrowed and how things went. You can also hear about good lenders from financial influencers or high quality financial podcasts. The better your source, the more confident you can be when you borrow (and the less likely you are in trouble).
An email received from a financial institution is not a good source of information. Spammers send them out in the millions and you never know who you’re really dealing with. The same goes for letters that come to your house.
Unsolicited phone calls, especially from a blocked number, are also notoriously used for banging. Even though it appears that the call came from a local number, the caller may be on the other side of the world. With tools like VOIP, anyone anywhere can get a phone number that looks local.
If you are dealing with a lender who is not a household name, use extra caution.
Sometimes the swindlers indulge. When you start talking to a lender, pay attention to how it operates before handing over your Payday information or your money. If you see any of the red flags below, find a different lender.
Reputable lenders do not charge fees in advance. The “early fee scam” is commonly used by thieves, who explain that you need to pay a fee for them to process your application. There are legitimate loans that cost money to borrow but are usually large loans like home loans, and these fees are clearly explained many times in the loan documents. Whether you are making a Payday loan or an auto loan, rates should be avoided. If you end up paying a fee, you can be sure that they will continue to try to get a “last fee” from you (over and over) until you realize that you are being the victim of a coup.
Lenders are not in the market to lose money, so they can not guarantee that they will lend to someone. Some lenders are willing to take more risks than others, but they still need to know something about their finances and take wise risks. If you have no credit history or have a bad credit history, no income and no assets to use as collateral, how can a lender be sure to get your money back? If it sounds too good to be true, it probably is. Creditors who approve “anyone” are usually smarter than they look and they have a way of earning high profits in exchange for taking big risks (which means you’re paying a lot) or are trying to steal money or data.
If you are applying for a loan, you are trying to get money, so why do you need to send money? Again, some loans require legitimate fees but you can usually pay as a loan discount or on the first installment of your loan payment after receiving the cash. If lenders require payment by bank transfer or other instant payment services, it is almost certainly a fraud. After you send funds, the money is gone, and it’s almost impossible to find out who got the funds.
Unprofessional sales and services
Banks are not known for their warm and friendly interaction, but you do not have the feeling that you are dealing with an illegal operation. A website full of incorrect words and other mistakes can be a sign that you are dealing with crooks. Your browser’s security holes are also a bad sign. Finally, watch how the sales team talks to you because abusive and high-pressure behavior is a clear sign of fraud.
First impressions are important, and scammers, with nothing real to offer, choose names with official names (or confusing names). The word “Federal” in the name of a creditor does not mean that the US government has endorsed the creditor. Copying the name of a large bank with one or two changed letters is another tactic.
Some loans are dangerous no matter who you borrow and it is easy to find such loans online. Expensive loans can lead to a debt spiral that will leave you in a worse position than you were before you started. Payday loans, foreclosure and Payday loans are notorious for high rates that are charged over and over which end up being the equivalent of three-digit interest rates.
Illegal lenders are also an online risk. Unlicensed lenders (loan sharks) should not lend, but of course, they can offer loans and collect fees from anywhere on the planet. Escape from these people to avoid problems. Illegal practices take advantage of individuals who are desperate to borrow or who do not have many options. Common practices include:
Charge a higher interest rate than the market usually charges
Renew or “roll” loans at high rates
Married sale of products such as life or disability insurance
Disrespect for debt collection laws, leaving you embarrassed
In your search for online loan sites, you may come across companies that clearly say “we do not lend money.” The Web is full of click generation sites that provide your information to lenders. Click generators are good at marketing: you are looking for a loan and they can help you find someone willing to lend. Several large websites do this and offer a valuable service (while earning a few dollars on each loan), but darker operations can cause problems.
Be careful when giving information to sites that promise to make purchases for you because they can simply sell your contact information to a group of predatory lenders (or identity thieves) who will try to take money from you.
Secured loan means only borrowing as much as you need and can afford. Lenders are eager to give you the largest loan possible (according to your calculations, which are based on your income). But you do not have to ask for the maximum, and it’s seldom a good idea to do that. Even if you can pay the payments now, you never know what surprises may come in the future. Research, compare, and be wise in choice.