There are different loan options. However, personal loans are basically purpose loans. It is up to you to decide how you are going to use the loan, though some instances lenders may limit what you can use the money for. They are some basic requirements you need to satisfy before lenders agree to give you a loan. But why do people take personal loans? Personal loans are used to repay credit cards, though they can also be used for other personal reasons. Some people even use personal loans to pay student loans in order to save on costs that result from high-interest rates. Nevertheless, they do not have tax benefits like student loans. Still, personal loans may be important when you want to acquire something but you do not have enough cash or savings. In addition, you can finance your wedding using personal loans. These loans are so important and that is why they have increasingly been used in the recent past. It turned out to be those who consider a consulting firm prior to taking a loan have found themselves at ease in paying all debts.
Why do people prefer personal loans? Let us consider at least three reasons. Firstly, they are unsecured. This means you do not have to attach an asset as collateral when borrowing and lose it when you default. This one of the reasons why it is so difficult to secure them. If you default, a lender is only restricted to three courses of action; forward your details to credit bureaus, file a court case against you or hire the services of a collection agency. Secondly, the loan amount is fixed and can range between $1,000 and $50,000.
However, the loan amount will depend on a number of factors, among them your credit score, your level of income and other debt. Thirdly, the interest rates are always fixed and cannot be altered within the loan period. Nonetheless, specific types of personal loans may have volatile interest rates. This results in fluctuations in payments.
Personal loans have attracted many people because of the aforementioned features. To keep up with high demands, money firms have decided to invest in money lending businesses. Most of these dealers are trustworthy and even though their goal is to make a profit, they care about their clients. However, their others who want to benefit quickly but to the detriment of their customers. How do you identify legit lenders and fraudsters? Many scammers are dealers or independent individuals and it can be so difficult to identify them. Use the following nine red flags to safeguard yourself along with your money.
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• No credit checks. Online lenders only profit from the interest rates when loans are repaid. How can they be certain that a borrower will pay the loan? It is only by looking at his or her credit history. Do not trust lenders who allege that they have a way of estimating your credit through means such as responding to survey or through social media. Legit online lenders must conduct two checks, soft and hard inquiries. The former only examine applicants’ information and not their credit report. A hard inquiry will be carried out after you have accepted the interest rate and prior to the funding of the loan.
• Upfront fees. This has been the largest and the most successful scam for long. Lenders would ask borrowers to send origination fees from their bank accounts in order for the loans to be processed. It worked for long until individuals became wise and now scammers ask for debit card data as security on the loan. They will assure that they cannot tamper with the funds in the debit card and that they only intend to use it as a guarantee on the loan. They then take everything from the card and never will you hear from them again. If an institution is certain it can offer you a personal loan, it would be illogic to ask you for upfront fees.
• Unregistered lenders. The law requires that all personal loan institutions and other lenders get registered within the states they operate. Do not trust lenders who say they don’t have to register since they operate completely online or for the reason that they aren’t US-based. Always check the complaints against lenders through the Attorney General’s web. Make sure your moneylender online can be trusted A1 Credit.
• Missing physical address. All registered companies must have a physical address. Even the ones operating online must have an office somewhere. If you cannot see a physical address in their websites avoid them. If you have doubts about the lender, look for its physical address from Google maps.
• Unexpected Emails. Scammers will send you an email with a very good loan offer and a link where you can feed your personal information. In most cases, they have malicious software within the link which has the ability to hack your PC. If this is not the case, then the information you give may be sufficient to take your identity.
• An incomplete offer. The law requires loan companies to offer complete terms and this should include the overall cost, the principal plus the interest before a borrower signs. In case the loan offer is given do not have all these details, and perhaps has spelling and grammar mistakes, avoid it.
• Time limits. If you are told the offer is urgent and expires soon, it is most likely to be a rip-off. All legit lenders will offer constant rates depending on the client’s credit. If they tell you the offer will expire soon, they only want you to act faster before identifying any kind of scam in the process.
• Guaranteed approval. Legitimate companies will not tell you such things. In order to be approved for a personal loan, your information must be assessed and verified first. There is nothing like guaranteed approval in the money lending business.
• Pay through a gift card. Using a gift card is similar to using cash. Once the funds have been taken, you can neither trace nor get back. Legitimate lending companies never ask clients to pay through gift cards. In case you are asked to do that, go for other loans.
There are so many companies that offer personal loans out there. Some scammers take advantage of borrowers’ ignorance to defraud them. Do not allow this to happen. A legit lender should have credit checks, a known physical address, and specifies the terms of the loan before the borrower signs. The above red flags will help you safeguard yourself as well as your money from scammers.
