Gone are the days when people would run to the bank to apply for a quick loan for their businesses. In today’s modern times when technological advancement is at its peak and the internet has solutions to any, and every problem, who knew getting an online loan would be so easy!
Technology has clearly disrupted traditional lending through the creation of numerous online lending platforms that have made thing really easy, especially for small business owners.
These business owners can now easily skip the whole process of having to go to their local bank and get the required funds for their business though an online lender or provider.
Risks Associated with Online Loan
If your business has been going through tough financial crises lately and you are looking to get instant cash to deal with it, look no further and get an online loan this instant. However, as great and amazing as it sounds, you need to be wary of a few things before applying for a loan. These things include getting your desired amount of capital in a reasonable period of time, and also at the lowest possible rates. You must lookout for shady online lenders who can trick you into it by getting you to give out sensitive and personal information about yourself.
In a nutshell, you must keep an eye out for possible red flags and risks associated with borrowing money online.
There are three major red flags that you should be aware of:
Paying More Than You Should
When dealing with shady or suspicious lenders, you might end up paying more than you should in the name of loan fee and interest fee. You will get your loan, but at the cost of a thousand dollars extra that you shouldn’t be paying in the first place.
Losing Your Money
This is the biggest risk or threat that comes with getting an online loan. You can actually end up losing money than getting a loan if you happen to contact a fake lender. Such lenders have counterfeit shops set up and they typically promise you the best rates, but end up charging really high fees for approving your loan.
This is as obvious as it sounds; someone steals your identity and pretends to be you. In this case, identity theft happens when a bogus lender uses all your personal information and then manages to steal your identity. This information may include your addresses, social security number, date of birth, etc. Once they get their hands on all this sensitive data, they can easily forge your identity.
However, these red flags and risks don’t at all suggest that you shouldn’t be getting an online loan for your business. All you need to do is be wary and alert, and carry out proper research in order to find out the most reputable and honest online lenders.
The Ultimate Guideline for Getting an Online Loan
Looking out for fake and doubtful lenders is one thing; there are also other factors you need to consider when applying for a loan online.
Here are a few tips and guidelines to help you get started.
Pay Attention to Lending Costs and Fees
In order to get a loan and identify if it is a good deal, you must be able to calculate the APR (Annual Percentage Rate), which is defined as the rate of interest that is stated as a yearly rate. In other words, this is the principal percentage that any lender would charge you in return of lending you money.
So, you must be aware of what the lender is charging you in the name of borrowing costs and fees. Some of these include application fees, origination fees, and processing costs, to name a few. You should be certain of how much will be going into your bank account and how much you have to pay to the lender.
Lookout for ‘Too-Good-To-Be-True’ Offers
When you are in need of urgent cash for your business or any other thing, you are likely to be tempted towards an online loan at face value. Many lenders will advertise “as-low-as” rates, which often sound skeptical and ‘too-good-to-be-true’. You must understand here that legitimate lenders and companies will always offer loans to public through transparent and reasonable terms. So if you ever doubt such loan offers, always trust your gut.
Research Your Options
As emphasized previously, always do your homework and research your options. ‘Due diligence’ is key on your part here and it is absolutely crucial for you to look beyond flashy websites and or offers that sound unreal. You want to get in touch with a transparent lender who, firstly, doesn’t rip you off and secondly, offers verified online security, longer time periods, as well as single digit interest rates. Aside from transparency, everything is crystal clear about the deal you will be making and you won’t end being caught in a clever trap.
Know Your Credit Score
Applying for a loan without knowing your credit score is one of the biggest mistakes you could make. This is because your credit score is a true analysis of your financial situation. It is also a way for lenders to check if you qualify for an online loan. If you don’t have enough finances up your sleeve, you are likely to head towards bad credit loans.
Always Determine the APR
Many lenders obscure pricing information with misleading numbers and statistics. They might even disguise their pricing with terms like “factor rate” or “general rate”. You need to steer clear of such lenders because they are likely to be charging you more than they should. Try comparing different lending options so you know which way to go. If a lender refuses to give you an APR, you should know you might be heading towards trouble.
In a nutshell, lookout for frauds, be alert and borrow wisely. Also, borrow only as much as you can easily repay.