An unsecured loan will get you money quick; but there are some drawbacks that you should be aware of before seeking an online loan. Let’s first look at the difference between an unsecured loan and a secured one.
Unsecured loans are based on your ability to pay back the money, as determined by the lender.
Secured Loans are backed up by an asset such as a home or vehicle. These items can be taken from you, by the lender, if you are unable to pay the loan.
In the past, you would have to go to a bank or credit union to obtain a loan, but in recent days, a loan can be obtained from the comforts of your home – which is a very tempting alternative – but the question remains: is this concept in your overall interest – are online loans safe? Let’s take a closer look at everything you need to know prior to choosing to go with an online lender.
Convenience is a very tempting benefit as everything is completed online, including providing copies of paystubs and driver licenses information. Submitting personal information over the internet may scare some people, but in truth, some off-line lenders enter your personal information in an online database also.
Another benefit is that you will avoid having to dealwith a daunting sales pitch from someone trying to boost a commission. By using an on-line lender, you remove the temptation of purchasing another type of financial product such as a checking or savings accounts. Online lenders usually focus on the task at hand – lending.
Risk of losing money. Lenders that are not legit can easily set up an online profile, make tempting promises, and charge you high fees and ultimately fail to provide the services that you paid for.
Paying more than you planned. Even if you get a quick loan, in the end you may be paying more than just the loan, as fees and interest rates could run you thousands of extra dollars later for a few bucks in your pocket now.
Identity theft can happen because some of the information used on a loan application, including a social security number, current address, and birthdate is valuable to thieves that want to steal your identity.
Not all online lenders are able to loan monies in every state, so make sure that you check on the territory that the online lender has access.
Loans that are not secured do not have a house or a vehicle as collateral back up; therefore, you financial status (past and present) may be scrutinized more closely. Additionally, a minimum credit score may be required, to be considered for a loan.
How to choose a reputable online lender
When choosing an online lender, pick one that has a known name and a good reputation. Read online reviews and check the Better Business Bureau (BBB) for complaints and negative results. Additionally, prior to submitting an application, check the US Consumer Financial Protection Bureau (CFPB) as they maintain an up-to-date database of complaints and company responses, regarding financial products.
Using a legitimate and reputable online lender will eliminate many problems, like inflated fees. Do your research and consider all online reviews – both positive and negative. However, remember that when it comes to on-line reviews, everything you read on the internet is not always fact. Some reviews may be posted from employees of the company or even some con artists. It is safest to borrow from an online lender that you heard things about from a trusted source, such as personal friends and family members.
Avoid scammers and note any “red flags”
Unsolicited emails or snail mail should be a red-flag to watch out for – as scammers send out millions of these tempting offers in the hopes that someone will fall for it and send them their personal and financial information.
Keep in mind, that reputable on-line lenders will not ask for up-front fees to process a small personal loan application. If you are asked for up-front monies, choose a different lender.
Final Note: Many reputable online lenders will offer a quick and easy personal loan (with decent terms) – but it is strongly advised to shop around when making your final decision regarding using an online lender.