There are personal loan scams you need to be aware of.
Times are tough and made even more challenging with the health crisis. People are dealing with health and financial issues left and right. This led to many Americans desperately trying to stay afloat. And the last thing you need is falling victim to financial scams. As desperation sets in for some, criminals take advantage of this and try to swindle you out of hard-earned cash.
Finances are challenging at this point with so many people out of a job or on furlough. As businesses are starting to pick back up, it puts Americans in a better position to manage their finances again. As you do this, one of the options on the table is taking out a personal loan. But why do you need one to help you stay on top of your finances?
Reasons to take out a personal loan
Getting into debt like a personal loan is not something you take on lightly. This is a decision you have to think about thoroughly especially when things are just picking back up again. Especially as there are personal loan scams you have to be on the lookout for. But personal loans can help you improve your finances if you get one for the right reasons. Here are a few of them worth looking into.
Better than pay day loan
The pandemic could have put your back up against the wall in terms of your finances. When you have nowhere else to go, you might be forced to look for quick sources of funds. One of which is a payday loan. But you have to know that these types of loans come with huge interest and fees making it a very risky option.
Rather than a payday loan, a personal loan could be a better alternative. For one, the interest rate is more manageable. This is one of the biggest factors to consider when comparing a payday loan with a personal loan.
The health crisis forced a lot of Americans to take a long hard look at their savings, especially their emergency fund. This is the one fund that is supposed to help them get through tough and unexpected times. But some people did not really pay much attention to it; they are only finding out the true value of an emergency fund now. And you could be one of them.
When you find yourself in a really tight spot, a personal loan could be a good option to consider. But this is also the reason why a lot of personal loan scams proliferate at this time. It is not as steep as other types of quick loans. It is also better than selling items you need at home just to raise cash. It also beats dipping into funds that would cost you early withdrawals and fees if you take money out early.
Remodeling or Home Repair
There are a lot of reasons why you want to take on a remodeling project for your home. In most cases, it is to get some timely and much-needed repairs out of the way. It is better to get this done early as a precaution rather than being forced into expensive repairs when it happens. Not only does it become time-sensitive but it makes a big dent in your finances as well.
At times, you could be thinking of selling the property in preparation for a big life decision. It helps to get some repairs and improvements done at home to increase its curbside appeal as well as market value. The higher you can sell, the better investments your house becomes. You can also use that extra money to increase your retirement fund.
Personal loan scams to avoid
Now that you have an idea of how personal loans can help you, how do you make sure that you do not fall victim and be scammed out of money? Here are a few things to keep in mind
The lender guarantees you approval for the loan application
Unless you are talking to and borrowing money from your parents, lenders will not be able to guarantee approval for your personal loan applications. There are even times when your parents would not be able to lend you money. Legitimate lenders need to account for several factors before they can give you the nod on your loan application.
Demands upfront fees
One of the most obvious personal loan scams is when the lender is demanding you pay a fee upfront first even before they process your application. Just to be clear, there are upfront fees you need to be aware of like an origination fee. CNBC shares that origination fees are a one-time cost lender subtract from the amount you borrow for processing costs. But the way lenders do it is that they take it and subtract that amount when you get approved for the loan. If a lender demands that you make an out-of-pocket payment during the application, you need to take a closer look at the legitimacy of that company.
The company name is not registered in your state
Due diligence should be a bare minimum for you when making any financial decisions including loan applications. You need to do a background check on the lender just to make sure that they are registered in your state to conduct business. This should actually be one of the first things you need to do when dealing with a lender.
3 signs of a legitimate lender
If you want to steer clear of personal loan scams, look for these signs from your lender.
They have a physical address
In this day and age where technology has made it a lot easier to set up businesses and companies online, most legitimate lenders still have a physical address. They maintain an office to keep the business running. That physical address would usually come with a landline number you can call during office hours for any concerns you have. Look for these when dealing with a lender.
They have a secured website
You also need to check your lender’s website to make sure they have an online presence. But know that a website or even social media accounts are not enough. When looking at their website, pay close attention if they took the time to secure their site. This is an SSL certificate they invest in to help ensure that their website visitors are secure when visiting their website. Most scammers would not spend time and money setting this up.
They have positive reviews with the Better Business Bureau
The Better Business Bureau or BBB is a great place to look up the lender you want to work with. Take a look at the reviews that past customers have said about the company. BBB usually rates businesses putting a lot of weight on how companies resolve issues of their actual clients. This gives you an idea of how they take care of their clients. BBB shares that they help people connect to businesses and brands they can trust.
There are a lot of personal loan scams out there who are trying to take advantage of the financial hardships of other people. Taking out a personal loan is still a good option for you to take control of your financial situation. You just have to make sure that you are dealing with a legitimate company.