Six Red Flags that Signal a Wrong Personal Loan Lender
At least 50,000 people filed a fraud report with the Better Business Bureau in 2018. The median amount lost to these fraud schemes was about $152 per person. Unfortunately, many people have fallen prey to wrong lenders and lost thousands of shillings at a go. They have also lost their peace of mind and suffered the effects of stress as a result.
These reports were 10% more in 2017, and they cost the consumers over $905 million in losses. However, $63 million more was lost in such incidences in 2016. The Federal Trade Commission says that awareness and education amongst consumers partly caused a reduction in fraud. The law was also positively recognized for enforcing conditions that cut down on fraud. There is nevertheless a very high chance that you could fall prey to fraudsters, especially in the loan’s arena.
Are you at a higher risk of loan scams?
One in three people actually, fall victim to these fraudsters. A study done by the Wharton School of Business has researched on target age groups for scammers. Seniors, for instance, are a favorite hunting ground group for scammers. The Wharton researchers also did a Health and Retirement Study. Over 33% of their respondents had been subjected to financial fraud in a period of five years.
One third also said that fraudsters had used or attempted to use their checking accounts without permission. Today there exists a different group of fraudulent lenders. Their main target is a borrower who has been turned away by conventional lenders.
If you have a low FICO score, the chances are that your bank or credit union will deny you a loan. Fortunately, some alternative lenders can give you credit under such conditions. The problem surfaces when looking for a legitimate personal lender.
A personal loan lender is going to be part of your financial life once you have initialized the lending process. They will be featuring predominantly in the processing of your repayments. If you are going to have a problem, their customer service department is the team you will turn to for help.
This is the entity you will also be sending hundreds or perhaps thousands of dollars too in interest charges. It is a relationship, therefore that needs to be professional. In a market filled with shadowy scams and you need to be aware of the red flags. This may include;
Lenders with a no credit check loan claim
When it comes to gauging risky borrowers, both online and conventional lenders, all turn to credit bureaus. The report that they will receive from these bodies will determine how much interest they should charge you for the advance. Any lender, therefore, who claims to use innovative technology to estimate the interest charged on credit is one you should avoid.
Some claim that they gauge credit history through social media data or surveys. A legitimate lender will go through this lending process, much like a bank. Instead of a hard credit check, they will perform a soft check. This type of credit history verification does not feature in your report. It will therefore not have a negative impact on it. If you are getting an advance from a traditional bank, they will perform the hard type of inquiry once you consent to it.
Remember though that payday lenders will perform a soft check but will charge sky-high interest charges. Their advances are, however, also short term in nature, payable in two weeks or a month. Make sure to check direct lender charge quickly for high costs to ensure that they can stay afloat if the borrowers default on repayments.
Asking for collateral or upfront down payments
This is the most obvious sign of a scammy lender. A while back, a lender would first,request you to wire them an origination fee. The fee would be sent from your checking account to the lender. This would then kick off the loan processing.
With time, consumers familiarized themselves with this outright form of theft. Now bad personal lenders ask for debit card details as collateral for the advance. These lenders can use this information to drain your account. You will have nowhere to turn to for justice if they are online-based, with no physical location.
To keep yourself safe, remember that an excellent personal lender will not charge you for credit beforehand. If they need you to pay them for any charge, they will slate it on your advance charges. Some better lenders do not charge for origination fees. Research and look for such creditors, because it will save you a large chunk of cash in the end.
Unregistered with your state
To curb predatory lending state's Attorney General's offices have laws and regulations of operations for all lenders. A legitimate personal lending business will, consequently, have to be registered with the AG offices of the state they are in operation in. After registration, the State Attorney General's Office monitors the business to ensure that they will stay in line with the law on lending.
If a lender makes outrageous claims, like they are not required to register because they do not have a physical store, they are not genuine. A lender could also claim that they are not subject to state law because they are registered in another country. If they are not registered with your country or state, they are not supposed to be operating there either. If unsure, check with your Attorney General's website or office for further clarification.
Lack of a physical address
An established lender has a physical address or office. To be sure, check on their contacts or look for their address on Google Maps. Some lenders claim to have an office, but on close inspection, their location is nonexistent. Some online lenders also have a physical office that should feature on their websites.
The lender has complaints leveled against them
The online personal lending industry has grown by leaps and bounds because they are good at customer service. These businesses do handle customer problems efficiently and professionally to ensure that the borrower will come back for their services. There are lenders, however, that are very problematic. They have poor customer support and service. They tend to frustrate the borrower during repayments, which means that they could feature in the Consumer Complaint Database of the Consumer Financial Protection Bureau. Take your time and search your lender's history before you are tied to an inferior lender.
They keep pushing you to borrow more
Every lender has a clearly stated minimum and a maximum of credit they are willing to extend. Stay away from a lender whose minimum lending amount is excessively high.Avoid one also whose maximum lending amount is to low such that it will not meet your financial obligations. If a lender keeps insisting that you should roll over the personal advance and borrow more, they are hoping to trap you in a debt repayment cycle.
Loans are expensive and can do a lot of damage to your credit score and history if mishandled. If you note any of the above red flags, walk away and find a legitimate and safe lender.
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