Online loans are easy to get, dangerously easy.
If you’re shopping for an online loan, do some research, especially if you’re not familiar with the company. Type the lender’s name into your favorite search engine with terms like “review,” “complaint,” or “scam.” If you find bad reviews, look elsewhere.
Other steps to protect yourself are:
- Check to see if the lender is registered in your state. Lenders need to register where they do business. Contact your state attorney general or banking or financial services regulator to find out if a lender is registered.
- Don’t pay for a promise. If someone asks you to pay in advance for a loan offer, walk away. No one legitimate lender will ever ask you to pay for a promise. If they do, it’s a good bet it’s a scam.
- Check out the URL. Look for red flags such as misspellings and whether it’s similar to a well-known website.
- Find out the total cost of the loan, how much payments will be, and what happens if you can’t replay the loan. Online lenders may not take a check and may ask you to authorize automatic electronic payments from your banking account. If so, check your account frequently to make sure the charges are correct.
- Make sure the lender’s contact information – street address, phone number, and email address – are on the website or loan application in case there’s a problem later. It’s sometimes difficult for borrowers to identify and contact online lenders, especially if the borrower needs to revoke the electronic account access.
- Find out if the online lender will protect your Social Security number, checking account number, and other personal information. Read the privacy and opt-out policies. See if you can restrict the site from selling your personal information.
- Ask if the online lender will pull your credit report. Some online lenders will pull a credit report or seek other information from credit reporting companies before giving you a loan. They may want to confirm your identity or see if you have declared bankruptcy.
- Avoid lenders who reach out to you. It’s likely a scam.
While online loans seem convenient, you may be able to find a better interest rate with a bank or credit union in your community. Compare prices for the best interest rate and loan terms.
Another example of how an online loan companies can fool you is shown in a lawsuit announced Monday.
Thirteen attorneys general are suing OneMain Financial alleging that the online lender charged consumers nationwide hundreds of millions of dollars in hidden fees and interest.
OneMain Financial advertises high-cost installment loans with “clear, upfront terms,” but it packs those loans with hidden insurance policies and other add-on products that inflate the cost of the loans by hundreds or thousands of dollars, according to the lawsuit.
OneMain rushes consumers through fine-print loan documents containing the dense terms and conditions of the add-ons, the attorney generals allege, adding OneMain often hides the add-ons, sometimes misrepresents them, or even charges consumers who outright reject them.
The lawsuit also alleges that OneMain often closes loans on smart phones, where already small print shrinks to an illegible size.
“Consumers are struggling under the weight of an affordability crisis, and lenders should not be financially rewarded for multiplying their customers’ debt with expensive products they do not want or need,” New Jersey Attorney General Jennifer Davenport said in a statement.
If you’re having trouble dealing with debt, you can get help. Nonprofit organizations in every state offer credit counseling services that often are free or low cost. Learn more about possible options for coping with debt.
