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When you’re in need of a personal loan, the last thing you want to worry about is a fraudulent lender. It’s important to do your research and make sure the lenders you’re considering borrowing from are reputable and trustworthy. There are characteristics you can look for and warning signs to avoid when choosing a credible lender.
Our partners at Fairstone shared 6 tips to help you identify a credible lender:
1. Look For Credibility and Experience
Before sharing any financial information with a company, do some research on their history. Make sure the lender has adequate knowledge and is well-known in their industry. If a company has been around for years and you can easily find information about them on directories or review websites, you are likely dealing with a credible lender.
However, many loan scams attempt to impersonate real and credible lenders. If you’re not sure about a website or email you have received, reach out to the company directly to confirm it’s legitimate.
2. Ask Yourself: Is The Offer Too Good to be True?
If a lender is advertising that you can get a loan without undergoing a credit check, be cautious. Responsible lenders will assess your ability to make loan payments by looking at your credit score, income, and employment history. Having a low or bad credit score doesn’t mean you won’t qualify for a loan.
The only caveat to this is that many lenders will offer you a quote that doesn’t impact your credit. Too many credit checks in a short time frame can impact your credit, so these types of quotes use what’s called a “soft” credit check, allowing you to shop around with different lenders to compare their rates.
3. Verify Contact Information
Legitimate lenders will have a physical address where they conduct business and receive mail. Even lenders that do business online exclusively will typically have a brick-and-mortar headquarters. Furthermore, most lenders will ensure their address and telephone number are available online.
For these reasons, a lack of physical location and/or contact information indicates that a lender may not be legitimate.
4. Be Wary of up-Front Fees
You should avoid any lender that requests payments be made before receiving your loan. Hidden or up-front fees are an illegal practice in Canada. A trustworthy lender will ensure you receive and understand the complete terms of a loan, including the total cost of borrowing after interest is paid.
Additionally, if a lender asks you to wire transfer money directly to an individual, or requests forms of payment that are hard to trace such as a pre-paid credit card or gift card, it’s likely a scam.
5. Check The Source of Any Offers
If you receive a loan offer from a personal email account (e.g. Gmail or Hotmail) rather than a corporate email address, this is another warning sign of a loan scam. Most credible lenders will have their own email domains that match their company name and website. Always check where the email is coming from to confirm its legitimacy and be cautious before clicking any links in them. If you’re not sure whether a link is safe or not, it’s safer to visit the lender’s website directly via your web browser.
Look for issues like spelling and grammar mistakes, ‘homemade looking’ logos, and awkward documents. Legitimate companies will ensure their website and communications appear professional. If a lender’s website or emails look unprofessional in any way, consider these red flags.
6. Confirm The Website is Secure
Because financial companies like personal loan lenders handle sensitive personal information, their websites must be secure. This requires having a Secure Sockets Layer (SSL) certificate, which provides an encrypted connection between your computer and the lender’s website.
Confirm the lender’s website is secure by looking for the padlock symbol beside the website URL and check that it starts with “HTTPS”. Both of these components indicate that the website and your personal information are secure.
7. Expect Professional Service
Reputable lenders will not pressure you into providing financial information or proceeding with a loan without making sure you understand the contract you’re about to sign and giving you the opportunity to ask questions. Lenders that use extreme tactics to pressure you into a loan, like saying your offer is only valid for a few hours, are trying to trick you into making an uninformed decision.
Save yourself the stress of dealing with a personal loan scam and keep these 7 tips in mind the next time you’re in the market for a personal loan. If you or someone you know happens to come across a personal loan scam, contact your local police department and report it to the Canadian Anti-Fraud Centre.
Looking for a reliable lender? Loans Canada recommends our partner, Fairstone. Fairstone has been lending to Canadians for almost 100 years and has over 240 branches across Canada. Go to Fairstone.ca and get a loan quote to find out how much money you could qualify for and what your payments might be. No obligation and no impact to your credit score.
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