The trend toward doing everything online has grown to encompass the process of obtaining loans. This phenomenon applies to everything from mortgages and home equity loans to personal and auto loans. Those considering using online lenders need to be very careful that they are dealing with a reputable and trustworthy lender and not a scam company — or a bunch of computers that can’t provide personal attention if there is a question or problem with a loan.
Even people who plan to go through a three dimensional lender, such as their bank or credit union, will likely conduct initial research online in order to understand the types of loans available and how interest rates and their own credit history may affect their ability to borrow. While research can be very useful when negotiating a loan, the source of much online information is questionable. Borrowers should carefully investigate whether a website is run by a legitimate bank or a noncommercial site such as a consumer awareness or financial watchdog site. There are many legitimate non-profits that provide education on loans, especially mortgages, and have websites with reliable information. However, there are also many websites that provide misleading or outdated information simply to lure new lenders or to drive advertising to a site.
Some people will still decide to utilize online lenders. As long as they do so cautiously and with due diligence they will reduce the risk that the lender is a sham. Ignoring outrageous promises regarding rates and fees is the first step. Another important step is understanding that comparison rate sites will not include rates from credit unions, which may offer a lower rate than the participating lenders. Lastly, check the credentials of the lender itself to make sure it is properly licensed and regulated by the federal government.