Online Loan Lenders: How To Solve Your Problems?

Carl asked us the following question:

“How would you know if an online lender is not out to rip you off? I know there are many abusive lenders out there, but I also believe there are good eggs. What are the steps to take to ensure that I only deal with good online lenders?” – Carl, Naperville, IL

Finding a legitimate online lender that will help borrowers through a difficult period takes some time, but it’s worth the effort. Don’t be blinded by the easy and fast approval offers being peddled around; make sure that the lenders behind them are legitimate by following these simple tips.

Is it licensed in your state?

Online loan lenders can be licensed in their home state but not in your state; they can be operating in the UK or Canada. To ensure that they follow your state’s loan practice regulations, check if the lenders are registered with the State Department of Financial Institutions, the agency that oversees lending companies including online loan lenders. If they are not licensed in your state, they cannot sell loan products and you should not take out a loan.

Do online loan lenders follow state regulations?

Even if the lenders are licensed in your state, read through their terms and offers and cross-check them with state regulations indicated in this list by the National Conference of State Legislatures. Is the interest rate not exceeding the state cap? Does the direct lender observe the maximum loan amount and term? Is the refinancing option in accord with what the state allows? Take note that some states do not allow the borrower to extend a loan. If you’re in one of these states and your lender is offering fast and easy new loans to refinance your original debt, the lender is violating the law. If you believe the lender is performing an illegal activity, report it immediately to a local office of the U.S. General Attorney.

Do online loan lenders have an actual phone line you can call?

Although it’s not illegal to offer online loans even without a phone line, a lender that can be reached over the phone—preferably a toll-free number—will appear to be more legitimate. Any business, in fact, should be easily reached by its customers. Even if online loans today are designed for quick processing to get the approval on the same day during emergencies, lenders must still provide an option for borrowers to call in case they have more questions.

Ask a few test questions

The Association of Mortgage Professionals suggests that lenders should provide accurate and complete information in their solicitations and advertising. Likewise, you can gauge if a lender is ethical by asking these questions:

1. Will you recommend that I borrow more than what I need?

The lender should not recommend it, or at least he should tell you that you will be paying more for a loan that you don’t need. If he explains to you the disadvantage of taking out more money than you need, he is looking after your welfare, making him worth to deal with.

2. Is it okay to extend my loan?

The lender should discourage this. He may ask for your reasons, and if he knows that you can pay immediately, he should insist on it. Extending a loan may be more profitable for the lender since he can charge for more fees, but to your detriment. A lender that gives you this picture is more likely to earn your trust.

3. Can I use the loan for a new iPhone?

Of course you can, he might say. But he should also explain to you that personal loans are best used for emergencies, not leisure purchases because these loans are expensive. Telling you about this fact can make him lose your business, but it also shows he is an ethical lender that you can turn to when a real emergency strikes.

No hidden terms

Legitimate online loan lenders do not hide or bury charges; they tell you about all fees and charges that you’ll be paying. In fact, legitimate lenders will give you all the details even before you ask for them. The burden of explanation should rest on the lender, not on the borrower. If your lender only answers the questions that you ask and do not expound on the other things, you’re better off looking for another one.

CONCLUSION

It takes some time to sort through the various lenders out there. But give it your time and you’ll find a good lender who will really help you through a difficult financial situation.

By Nestor Gilbert

Nestor Gilbert is a senior B2B and SaaS analyst and a core contributor at FinancesOnline for over 5 years. With his experience in software development and extensive knowledge of SaaS management, he writes mostly about emerging B2B technologies and their impact on the current business landscape. However, he also provides in-depth reviews on a wide range of software solutions to help businesses find suitable options for them. Through his work, he aims to help companies develop a more tech-forward approach to their operations and overcome their SaaS-related challenges.