The internet has come to permeate every sphere of life, with the lending sector feeling the effects of the disruption too. Today, online loans are highly available through lending apps and websites where finances are disbursed without much scrutiny. Although online loans are very convenient and do come in handy a lot of times, there are some caveats when it comes to safety.
There are many genuine online lending facilities that serve their customers with utmost ethics and trustworthiness but for every credible lender there is a multitude of crooked lenders looking at your hard earned cash with lusty eyes. These are a few pointers to remember on reasons to be wary of online lenders and some ways you can minimize the risk of being scammed.
Potential Dangers of online loans
1. Dangerous loans
One of the ways that unscrupulous online lenders scam their clientele is by charging extremely high interest rates and penalties. These tend to be hidden in the fine print or by presenting it in a way that disguises the true rate. For example, a lender who charges a 2.5% monthly interest may make it appear as if they are competitive with a lender who offers 4.5% per annum, whereas the two are vastly different. Even when the terms are clearly delineated, it is not uncommon for loan providers to use unlawful recovery methods such as intimidation.
2. Information theft
In the internet age, personal details are a premium for data mining and advertisement companies. As such there are people who make a living out of gathering personal data on the internet. By tricking people to fill out loan application forms, fake online loan platforms can gather highly confidential information that they then sell to marketers. This trick can also be used to steal passwords to sensitive services such as social media, email and online banking.
3. Scamming
Online loan scammers are aware that they are targeting desperate, naïve people who would go to great lengths to get a loan. When you engage them, they ask you to send them funds in the name of miscellaneous fees such as registration, loan application and other processes. Once they have received the cash, the loan never gets disbursed, and in some cases, they will continue to demand additional fees while offering false promises.
How to Protect Yourself from Unscrupulous Online Loan Providers
1. Be wary of lenders who spam your email or phone
In order to maximize their reach, unscrupulous lenders usually send unsolicited emails, text messages and calls in high volumes hoping to entice gullible recipients to use their loan products. When you receive such emails from unsolicited sources, the best approach is to ignore them and more importantly avoid clicking on any embedded links.
2. Think Twice if They are too Generous
When the deal is too good, it is always advisable to conduct due diligence on the potential lender. One strategy used by scammers to lure unsuspecting victims is to publicize extremely attractive terms. for example, a lender can promise you a guaranteed loan without looking through your financial records. The whole point of lending services is to make a profit, so a serious lender would not jeopardize their capital by lending without proof of ability to pay back. Real online lenders will go through the usual due diligence that banks use to appraise their borrowers.
3. The design of the website or app
Serious, reputable loan providers invest their time and resources to project a professional look. This includes designing an app with a beautiful layout and free of errors. On the other side, bad loan apps and websites tend to be hastily put together, thus are full of oversights such as malfunctioning code, spelling errors and poor grammar.
4. Read the terms and fine print thoroughly
Just like loans from mortar and brick establishments, online loans come with hidden stipulations that can lead to financial trouble down the line. Internet users have a tendency to skip over the terms and conditions section when signing up for services. The creators of unscrupulous services often count on this reluctance by customers, to introduce unethical and controversial terms in the loan contract.
5. Ascertain the affiliation of the lender
A common trick used by online lenders to appear legitimate is to include the name of a reputed lender in a slightly modified name. For the unsuspecting borrower, this makes it appear as if the app belongs to said lender or that they have an affiliation. Whenever you see a lender using this approach, you can be 100 percent certain that they are not legitimate. Many banks also incorporate online loans in their portfolios. In such cases, you will find the link to such services on the bank’s official website. Seeking out loans from such lenders is the safest approach to getting an online loan.
Resources:
1. https://www.creditkarma.com/personal-loans/i/personal-loans-online-lenders/
2. https://www.thebalance.com/is-it-safe-to-get-a-loan-online-4045313
3. https://www.choicepersonalloans.com/wiseborrower/online.htm
4. https://blog.moneylion.com/are-online-personal-loans-safe/
