Question: How safe is it to apply for a loan online? It seems quick and private, compared to walking into a local storefront loan place, but I worry about putting my information online and dealing with a company I don't know. --Jason R., Nebraska
Answer: It's good to be concerned, but unfortunately fraud, bad business practices and mistakes can happen both online and offline. Just as people can be safer by choosing who they do business with face-to-face, they can look for warning signs and clues about online businesses.
Brick-and-mortar lenders cater to local residents, but anyone with a computer connection can see an online lender's website. Before taking out a loan, make sure the company is licensed to do business in your state. Reputable ones will usually list where they can do business on the front page of their website at the bottom, in the frequently asked questions, or some other easy-to-find location on their web page. If you want to double-check whether the lender actually is licensed, the information may be available by searching for the website of your state's attorney general or banking regulator. They may list licensed businesses, or at least have a phone number to call to find out.
The Federal Truth in Lending Act requires all lenders to disclose the cost of a loan before you agree to it. After you apply for a loan and before you give your digital signature to accept it, make sure an online lender states the annual percentage rate and dollar cost of the loan, as required by law. Lenders who don't comply with disclosure laws may be doing shady business in other ways too.
Before sending any personal information, especially your bank account number or Social Security number, make sure the website is secure. It should have "https" rather than "http" or the lock symbol beside the URL, and it may also state "encrypted" or have other information on how your privacy is protected.
Online borrowers are more likely to express their satisfaction or complaints online. If you're not sure about a lender, search for the company name and see if there are many unhappy customers online and whether the company has responded or done anything to resolve the complaints.
Applying for a loan online is not only fast and efficient, it's a quick way to shop around and get the best deal. Some online companies work with dozens of lenders and are able to automatically match you with the ones most likely to approve your loan. You can then compare the deals you're offered and choose the best terms or the cheapest cost.
For example, at this company, you might be able to receive a loan up to $1000, even if you have no credit history, poor credit history or a bankruptcy in your past, as long as you have a job or other source of income and a checking account.
Never pay a fee beforehand, to apply for a loan. You shouldn't have to pay anything before you receive the initial money that you're borrowing. There are plenty of legitimate companies who will let you apply for a loan without paying anything first, and you're no more likely to be approved by paying up front. In fact, it can be a sign of a scammer who's more interested in getting money from you than actually lending money.
Overall, applying for an online loan has the advantages you mentioned, of being quick, convenient and private, and it can be just as safe as applying in person, if you're careful.
If you don't want to get spam, make a new free email address with gmail or something and use it to apply for the loan. Then you can just use it for the loan and keep your regular email for everything else. --anon
You can kind of get a feel for what places are legit and what are scammers by the way they websites look, like you can get a feel for whether a business is legit or in a bad part of town and going to rip you off by the way the building looks. --Greg