From ordering a pizza to buying a house, the Internet has made all kinds of everyday tasks faster, simpler, and more convenient than ever. At the same time, though, it’s also made it easier for opportunistic predators and con artists to take advantage of online vulnerabilities, spread misinformation, and cover their tracks. Online loans are enough to make anyone paranoid.
A little paranoia can be useful in helping you avoid scammers, but too much can rob you of opportunities to potentially make your life better. For example, in recent years the popularity of online loans in Canada and the US has grown exponentially, with many benefits making them preferable to traditional types of loans. But can online lenders be trusted? How can you ensure you get the financial assistance you need without exposing yourself to fraud, unnecessary debt, or identity theft?
Online Lenders Vs. Traditional Lenders
A key part in determining how trustworthy Internet-based online loans really are is in understanding the difference between online lenders and traditional lenders. Notably, while most traditional loans are funded by banks, that’s not always true for online lenders. Some do partner with banks, yes, but others receive funding from different sources.
Many online lenders adopt a peer-to-peer finance model that directly connects borrowers with potential investors. The result is that online lenders cater to a wider range of borrowers. Instead of focusing solely on borrowers with pristine credit, as banks prefer to, some online lenders exist specifically to help those with poor credit.
Additionally, while banks tend to offer a diverse array of financial services, online lenders typically opt to specialize in just one or two products. Last but not least, because online lenders rely on automation during the review and underwriting process, applying for an online loan is often faster and more efficient.
How to Know if a Lender Is Trustworthy
The biggest advantages of online loans are also the things that make borrowers most nervous about them. Their speed and convenience often seem too good to be true, and lenders who offer their services to borrowers with poor credit are often suspected of exploiting people who have few other options. In some cases, these suspicions are fully warranted. The truth is that there is no universal answer to the question of “Can you trust online loans?” Sometimes the answer is yes. Sometimes it’s no.
That’s why it’s important to do your research when considering evaluating online lenders. Many online lenders are just as reputable as brick-and-mortar banks, some even more so. The best way to identify legitimate online lenders from scammers and predators is to educate yourself.
Ask friends and family members about their own experiences. They may be able to provide recommendations. Google news stories about the lender you’re investigating. Look for customer reviews. Check the Better Business Bureau for complaints. Check to make sure the lender is licensed and registered in your state. Chances are, if they’re bad news, it won’t be long before you start seeing red flags.