I’m looking for a personal loan to be able to cover an unexpected expense that I’ll have to pay next month. But I am finding it very difficult to find a legitimate loan because a lot of these lenders seem like a scam.
Interest rates are high. Terms are short. Penalties are astronomical.
There are even a lot of websites with spelling errors and bad English offering loans. How can I tell what’s a scam and what isn’t when searching for a loan?
Loan scams are everywhere, and the Better Business Bureau has a lot of information on the topic. Start with the Better Business Bureau to try and find out if there have been any complaints against the company you’re looking to get a loan through.
Reviews and reports on companies are key to ensuring that you’re not jumping head-first into a scam.
A few of the loans that you’ll want to avoid are:
- Title loans, where you use your car’s title as collateral. These loans have an interest rate of 25% per month, and they often need to be repaid in just 30 days. If you take out a $500 loan, you’ll be repaying $625 if you don’t roll the loan into another month. It's a lot of money to pay, and if you miss a payment, you may lose your car in the process.
- Payday loans are loans, dispersed rapidly, with the lender gaining access to your bank account. When you’re paid, the money comes directly out of your account. It's a great offer, but there’s one problem: fees. You'll pay high fees, and a lot of these loans are structured to keep you in debt for long periods of time.
One option you may want to consider is installment loans. You're already accustomed to these loans which are what you pay when you have a car loan or mortgage. Let's say that you’re looking for installment loans in Missouri, and you find one with great terms.
Installment loans are paid off in installments, over a period of time and primarily monthly, and they make a lot of sense for consumers.
You know how much you’re paying into your loan each month, and you have one set payment to make.
Installment loans are the ideal loan option.
Our experts recommend that you check to see if the lender has state registration. Lenders are required to register with the state, and this gives you an insight into if a company is operating legally or not. You can find this information at the Attorney General’s office or Department of Banking or Financial Regulation in your respective state.
Be cautious of high fees, read the fine print and never work with a company that has a “copycat name.” These companies will try to lure in potential customers by leveraging a name of another company. For example, the company may use the name Chase Financial Loans and try to lure in potential customers who believe they’re working with Chase Bank.
If you do your due diligence and avoid high interest loans, you’ll be in a better position to avoid scams.