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- Let’s take a look at everything you need to keep an eye out for
- Are Online Lenders Safe?
- Finding The Right Online Lender Can Seem Difficult
Borrowing money is often a necessary part of life. In some cases (such as real estate), it can be used to exponentially grow your net worth.
Interestingly, you don’t always have to find lenders in-person in order to secure funding. Online lenders offer plenty of opportunities, but not everyone knows whether or not they’re safe.
So, are online lenders safe? Don’t worry, we’ve got you covered.
Let’s take a look at everything you need to keep an eye out for
1. Online Lenders Are Legal
Although it may seem strange at first to borrow money from an institution over the Internet, it’s a relatively common practice in today’s society.
For those concerned about the legality of this situation, it’s no less legal than a lender that only serves in-person clients. But, this doesn’t stop some lenders from breaking finance laws.
Fortunately, though, these lenders are fairly easy to spot since they’ll often have negative (or falsely-written positive) reviews. Additionally, you can check whether or not the company’s website is properly encrypted.
By avoiding shady lenders, it’s unlikely that you’ll run into any complications at all.
2. Read the Terms Carefully
Although most online lenders are normal financial providers that offer fair rates to their clients, there are some firms that are predatory.
So, you’ll need to read the terms of your agreement thoroughly before you sign a document of any form. Otherwise, you may find yourself paying far more than you initially thought (or within a shorter time period than implied).
For example, a loan may be advertised as having an interest rate of 2.5%. But, the fine print may declare that this is only true for the first week the loan is borrowed.
Afterward, the interest rate skyrockets to 20%. As you may expect, this unprecedented increase could easily place a financial strain on the borrower.
While browsing the terms, you should also keep an eye out for any fees that weren’t initially advertised. It’s not uncommon for those who blindly sign agreements to experience hundreds of dollars in fees they weren’t aware of.
3. Your Credit Score Still Matters
To some people, there’s a disconnect between how an online lender operates versus one that has a brick-and-mortar location. In reality, though, they’re both firms that provide clients with money that’s paid back with interest.
This means that online lenders are still taking a risk by giving money to borrowers. So, your credit score will be a factor more often than not when seeking financing.
Those with a lower credit score can expect to be given higher interest rates, shorter repayment periods, etc. Additionally, you may have to offer collateral if you’re seeking a particularly large loan.
It’s in your best interest to get your credit score as high as possible before looking for an online lender. But, there are some out there (often smaller online firms) that have reasonable terms for those who have low credit scores.
4. You Pay for Convenience
If you want your loan within a short period of time, you can expect to pay a fee for this level of convenience. This is especially true if you need your loan within 24 to 48 hours.
While most lenders only charge higher fees for this expedited service, some may charge higher interest rates in general. As previously mentioned, it’s essential to read the terms of your agreement thoroughly before making a decision.
Otherwise, you may find yourself securing a loan that has a high-interest rate and a short repayment period. This could easily place you in a situation that makes paying your loan back while adhering to its terms a stressful process.
Interested in learning about how the online loan process works? You can find more info here!
5. Short-Term and Long-Term Options Are Available
Although it’s possible to secure a loan relatively quickly through an online lender, not all online loans have to be paid back within a short period of time.
Those in need of a loan with a longer repayment period likely won’t need to spend much time looking. So, this is something to keep in mind if you’re starting a business, need capital for investment, etc.
What you may find, though, is that loans with longer repayment periods are slightly more difficult to get approved for. This is typically due to the fact that long-term loans are often for higher amounts of money, so the lender is taking a bigger risk.
Are Online Lenders Safe?
Online lenders (similar to lenders in real life) aren’t inherently good or bad— they’re simply there to offer a service fo those who need it.
Like anything else finance-related, vigilance will go a long way when it comes to making safe decisions. Keep an eye out for shady websites, absurd agreement terms, etc.
By choosing a reputable online lender (such as one that has a strong online presence or plenty of organic reviews), you’ll likely find that your experience is nearly identical to what you would deal with in-person.
As a definitive answer: yes, online lenders are safe, and they offer plenty of utility to borrowers who may otherwise have difficulty securing the same amount of financing.
Finding The Right Online Lender Can Seem Difficult
It doesn’t have to be.
With the above information about ‘are online lenders safe’ in mind, you’ll be well on your way toward making the decision that’s best for you.
Want to learn more tips that can help you out in the future? Be sure to check out the rest of our blog.