Sometimes you need extra money to make a big purchase, or a major expense catches you off guard. Personal loans are often called “unsecured loans,” as they are made against your credit score and not against a form of collateral. If you need a personal loan, be sure you’re getting a fair shake by following these three tips.
Be Wary of “No Credit Check” Offers
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Loan offers that don’t run a credit check may sound tempting if your credit score is low, but you put yourself at a high risk of falling for a scam or paying exorbitantly high interest rates. If a lender does not check credit scores they risk not getting repaid, and they pass that risk on to you with interest rates that are far above average.
One scam which can result from a “No Credit Check” offer is the lender demanding a loan origination fee or prepaid debit card to “secure” the loan. Often that fee or the contents of the prepaid debit card disappear … along with the lender. While some lenders do charge a fee to run a credit check or process an application, that fee should come out of your loan once it’s approved.
Compare Interest Rates
Interest rates that are significantly above average are a sign of an unsavory personal loan. High interest rates not only cost you more but can be a sign of risky practices from the lender. Reputable lenders will give you an interest rate range upfront, which will then be narrowed down once your credit check is complete. Be wary of any lender who tries to gloss over their interest rate information or bury it in piles of paperwork.
Do your research before choosing a personal loan. Use an online tool to compare personal loan rates and make note of what the average interest rate is for the amount of money you are requesting, the time frame in which you intend to pay it back, and your credit score.
Check the Lender’s Business Credentials
When searching for a personal loan keep an eye on the lender’s business credentials. All lenders — even online companies — must register in the states in which they do business. Each state keeps track of lenders to ensure they are providing legitimate and legal lending services. Take the time to research the lender and make sure they are registered and operate in good standing. Check the Better Business Bureau to see if any complaints have been made against the lender and if the lender has taken steps to resolve those complaints.
When looking for lending options online, be sure to only utilize secure websites. Secure websites will begin with “https” and have a padlock icon in the address bar. Remember you are providing the lender with personal information that, if not secured, could easily be used to facilitate identity theft.
Personal loans can be a powerful tool to help you deal with an expected expense, consolidate existing debt, or make a big purchase. By being wary of “No Credit Check” offers, comparing interest rates, and checking the lender’s business credentials, you’ll feel confident that you are working with a reputable lender for your personal loan.