Five tips on how to safely borrow money online and what to do if you think you’ve fallen victim to an online loan scam.
There are many loan options today for people that are short on cash and need a loan fast. Access to quick cash when you need money to pay bills or cover an emergency can be a lifesaver. These non-traditional loan types are becoming increasingly popular as more and more borrowers are turning to the Internet for fast funding.
While many of the fast cash loan options are safe, as with everything, there are a few things you should watch out for. This article provides five tips on how to safely borrow money online and what to do if you think you’ve fallen victim to an online loan scam.
Dangers of Online Loans
The biggest risk you take when you apply for a loan online are identity theft and collection scams. If you apply for an online loan with a predatory lender, your personal information like your social security number, work information, and home address can be used by or sold to anyone, anywhere in the world. Protecting your information by knowing how to safely borrow money online and avoiding these types of loan scams is important to protecting your future.
It goes without saying that any time you give out your sensitive personal, banking, and payment information on the Internet you put yourself at risk of fraud or identity theft. And the chances are bigger if you don’t do your research about the online lender you want to get a loan from. That’s because many of the websites that advertise payday or no credit required loans are not lenders. Rather, they are businesses known as “lead generators.” They make their money by finding customers to recommend to lenders or selling your private information to the highest bidder.
According to the Consumer Financial Protection Bureau, lead generators will collect all your personal information, including your social security number, employment information, and bank account numbers. They will then send your information out with a request for a loan to their network of lenders. Next, your loan application will be sold to a lender and that receives the best commission. This means that your personal information is shown to several lenders instead of just one. And after your loan is sold to one of the lenders, it’s possible that all the other lenders the lead generator showed your information to will start calling and email you to sell you their products, too.
It’s best to avoid this type of online lead generator (disguised as a lender) for many reasons. To safely borrow money online, going directly to a lender means fewer people see your personal and bank information. And lead generators do not necessarily find you the lowest cost loans since they’re looking to make a profit from selling your loan.
Many consumers can easily feel confused about who is actually making them the loan. This is because online loan lead generates obfuscate their business model. It can thus be hard to tell if the website you click on is a lead generator or an actual lender. Futhermore, their contact information is often hidden, making it difficult to talk with them directly to make this determination.
The Five Tips
Here are the five tips on how to safely borrow money online:
- Look for the fine print. A lead generator will probably disclose that they are not lenders somewhere on their website, but they will often make this information hard to find.
- Look for red flags in the phrasing. When checking out an on online loan website, look for phrases like: “connecting you with our network of participating lenders,” or “we match you with lenders,” or “finding you the best lender,” or something to that effect. This verbiage is typical of lead generator websites.
- Be wary of unsolicited phone calls or emails. The Consumer Financial Protection Bureau (CFPB), the government agency in charge of making sure consumers aren’t ripped off by scammers, reports that they’ve received thousands of complaints from consumers who have been contacted via phone or email and harassed by fake debt collectors wanting to get paid for debts they don’t owe. Other scammers contact people offering loans they urgently need. In these cases, their personal information is likely to be compromised or sold off.
- Don’t pay for a loan up front. The point of a loan is the fact that you’re short on cash. Paying someone money you don’t have in order to get money makes no sense. Some websites will be a front for this type of loan company that will ask you to pay fees in advance before you get a loan. They’ll often tell you that you have been approved for a loan, but that you need to pay the first few monthly payments first, or send in an amount as insurance before they pay you the funds you need. Stay away from them, no matter how badly you need the money.
- Research the company thoroughly. Before you even start an online loan application, check out who you will be doing business with. Some ways to check out if the lender is legitimatel include:Use Google to get more info on the company. A quick search of the company on Google can bring up all sorts of information including complaints and reviews. Type in the name of the company and the keyword “complaints” to see what comes up in the results. Do a google search on the company’s phone number, too.
- And before you provide your personal information to a website, make sure that the website is secure. Good examples include an “https” in the URL or web address and a security certificate from Verisign.
- Check out the website’s domain name on the Whois database. Whois stores information about websites. You’ll be able to find out details like when the website was started, address, and who registered it. Be wary of newer websites or ones where the information does not match up.
Remember, not all online loans are scams. Learning how to protect yourself by knowing how to safely borrow money online is important before you apply for a non-traditional loan via the Internet.
If you’ve already applied for an online loan and think you may have fallen prey to scammers, then take the following steps to protect yourself:
- Add a fraud alert on your credit reports.
- Close all the bank accounts that you have given to online lenders and open new accounts. Be sure to explain to your bank why you are changing out your bank accounts so that they can help you protect your accounts.
- If you notice that fraud has been committed or you’re victim to a scam, file a police report right away and keep a copy. You’ll need the police report to prove that you were a victim of fraud to your bank.
By taking these five steps you will protect yourself and your personal information from predatory and irreputable lender, and secure the emergency loan you require.
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