Choosing a lender might be the first and biggest challenge you’ll have to face when shopping around for a loan. But being aware of these red flags can help narrow down your options and leave you with trusted lenders to choose from.
No credit check promises
Alternative lending has become very popular nowadays, mainly because of higher approval rates and faster loans. But there’s a reason why traditional lenders would want to check on your background and credit. Responsible lenders always want to ensure that you can afford to pay back what you aim to borrow and are able to hold your end of the bargain. While it’s not appropriate to advise that no credit check loans will only bring you harm, it’s vital to realise that they could cost a lot more than traditional loans.
While it could be tempting to pay less during interest-only periods, this is actually one of the simplest ways to waste money. Basically, since you’re only paying for interest, you’re not working on lowering the full loan balance.
Very long repayment terms
While a longer term means lower monthly payments for you, it’s just one of the traps many lenders use to get more money out of the deal, because there’s more time for the loan to accrue interest. Make sure that you sign up for a reasonable timeframe, just enough for you to recover and pay the loan back.
Early repayment charges
In relation to the above, there are many lenders who would charge a fee should you decide not to push through with the whole duration of the loan and pay off the balance in full. It would be wise to check it out early on so you’ll be free to pay off the whole balance should you acquire the money.
You feel pressured
No matter how big or small the loan is, it’s a financial commitment that should be taken very seriously. It is your right to ask whatever it is that you need to know regarding the loan and its terms before you say yes. If anyone tries to rush you into signing a contract without explaining everything thoroughly, you should definitely walk away. A reputable and honest lender will always give you the opportunity to review everything and walk you through the ins and outs of the contract, especially if there are multiple options available.
You are urged to borrow more than you need
While it’s great to have extra money that you can tap into, a good lender will not urge you to bite off more than you can chew just so they can earn extra interest. Steer clear from lenders who pressure you into borrowing more than what you need, because it can end in you struggling with the repayments.
The website isn’t secure
This is a no-brainer. Should you apply for a loan online, make sure not to send personal and sensitive information through unencrypted servers. Always check out if the site’s SSL certificate is valid, because only then can you ensure that your information is transferred securely.
No fine print on the website
Full loan terms are not provided
Whenever you’re trying to secure a loan, the most important consideration is to assess if you’ll be able to pay it back. This is why it is important that the repayment terms and schedules are disclosed from the very beginning, which includes a breakdown of how interest is calculated and any other associated fees. A responsible lender should fully explain how much your loan is going to cost you in the long run.