In the current global economic uncertainty, loans have lost their reputation of being seen in a negative light. There’s hardly anybody in the world who still needs to take some form of urgent loan to fulfill their needs when their savings don’t suffice. However, no matter how much we normalize taking a loan, it’s best to step in with full awareness and caution.
As more people have been taking big and small loans in recent years, monetary scams have also risen. If you’re planning to take a loan online, through a bank, or any other private lender, here’s a checklist that signals that your lender is illegitimate.
- They offer loans at an unusually high-interest rate: While it’s not uncommon for private lenders to provide instant loans at a high-interest rate, stay away from those trying to take advantage of your necessity. No matter how badly you need funds, never settle for a deal you can’t repay. The lender will likely take you down a spiral of a lot of judicial hearings to get more money from you. Even if you’re taking a small mobile loan, never risk your financial safety.
- No clarity about the repayment tenure or conditions: Legitimate lenders will often bind you under a contract that would clearly state the terms and conditions for the fast loan you’re borrowing. Typically, it would consist of all necessary information, such as the repayment tenure, monthly installments, interest rate, or additional charges. Any lender who claims to approve your loan without disclosing such information might be trying to scam you.
- They guarantee loan approval: From a lender’s point of view, it’s risky to claim that they will approve any loan request the client makes. Therefore, please stay away from lenders who say that they support all loan requests that they get. While calculating your chances of getting your loan approved, always check for the lender’s approval rate. A strong 100% approval rate is, more often than not, a solid fraudulent scheme. Be wary of any loan app that claims to offer this.
- The lender doesn’t bother to check your creditworthiness: While it’s true that many online personal loan lenders get you through the loan approval process with minimal documentation, it’s a big red flag when a lender doesn’t ask for any documents from you. Thinking from a lender’s perspective, why would it be helpful to give money to somebody without knowing how likely they are to return the money with interest? A legitimate lender would check your credit score and decide accordingly. Any lender who doesn’t demand a credit check would likely offer you loans at high-interest rates with hidden charges.
- Lender pressurizes you to sign: A loan is an agreement between the lender and the borrower. A legitimate lender would never pressure the borrower to sign the loan contract. Instead, they would acknowledge that the borrower needs time to understand the terms and conditions of the loan. If any lender forces you to sign a contract quickly, it’s best to tear up the contract and move to any other lender.
- Absence of contact information and physical address: It might sound like the most obvious thing a borrower looks for before taking a loan, but those in a hurry often need to remember to verify this information. A lender might have an address and a contact number on their business card. Still, it’s your responsibility to verify that the data is correct before taking any loans from them.
- The lender keeps a prepayment penalty: Some private lenders might have some information about a prepayment penalty in their contracts. It usually states that you would be penalized if you complete the loan repayment before the predetermined repayment tenure. Ensure that your lender doesn’t keep such conditions.
When taking a loan, it’s essential to research and understands the terms and conditions. If you need clarification on a lender or a loan, it’s best to seek advice from a financial professional or a government agency before proceeding.