Loan companies are popping up everywhere, but how do you know which ones to trust? Many people have made the mistake of using a loan company that is not legitimate. This can be problematic because you could find yourself paying sky-high fees and could even get stuck in an endless cycle of debt as you try to pay off what you owe them. The horrifying thing is that even if you are well-educated and you think that you are not the type to fall victim to these scams, it can still be hard to tell if a loan company is reputable.
If you are one of those people who don’t know how to tell if a loan company is legitimate or not, then this article is for you. We will give you a step-by-step guide that you can follow so that you don’t get scammed by anyone trying to sell loans that are not legitimate.
1. Examine the Company’s Website and Online Presence for Clues
Many scam loan companies often use online ads to lure you in. When you type in “online lenders” on your search engine, you will surely start getting advertisements from online lenders promising no credit checks, as well as fast and easy approval.
Of course, it’s just natural to click on these ads especially if you’ve spent the last couple of hours searching for a company that will lend you money. You will often be directed to the company’s website and from this point, you can start checking for clues whether it is a legitimate company or not.
Here are a few things that you can check on the company’s website:
- Does the website look professional? Check for spelling errors, the number of pages of the website, and whether it looks well designed. Many scam websites don’t bother to spend money on building proper websites so if the website is just one to two web pages then that should already be a red flag.
- Check the website’s ABOUT page if there is a company profile. This should give you information on when the company was established and the people behind the company. Reputable companies will not think twice about putting names and pictures of the founders or high-ranking staff.
- Check the website’s CONTACT page. Is there a phone number and physical address location listed on the website? An email address should not be the only way to contact the company.
- Check whether they have a presence in other online platforms like a Facebook page or a LinkedIn page. Do they have a considerable following or are the pages created just recently? These things should also give you an idea of whether the company is an established one.
2. Investigate the WHOIS Database of the Website
If the only thing you have is the website of the company, another way to check their legitimacy is to perform a WHOIS lookup. By entering the domain name (web address) of the website, a WHOIS lookup will be able to provide you with public information available on who registered the website, contact information, when the website was put up, etc. If the company does not have privacy settings, these details could be available to you.
How can this help? If you see for example that the website was just put up very recently, this could mean that the company has not been in business for very long. You can use this information to help you decide whether you can trust the company or not.
You don’t have to pay anything to perform a WHOIS lookup. There are websites like GoDaddy and DomainTools that offer free WHOIS lookup services. Again, some websites pay extra to hide these details in WHOIS lookups so this may not always give you all the detail you are looking for.
3. Look Into their Ratings on Better Business Bureau
The Better Business Bureau or BBB is a non-profit, private organization where you can find information about different businesses. The BBB has accreditation and rating systems that rate the companies’ performance, ethics, and how they resolve customer complaints.
If you are not familiar with a certain company, you can go to the Better Business Bureau website to see whether it has a BBB profile. You can check their BBB rating and other relevant information about the company. If the company does not have a BBB profile or they have a low rating, this could be a sign that the company may not be reliable.
4. Read Online Reviews
If you are not sure about how a loan company operates, then you can read what previous customers are saying about the business. Nowadays, it’s easy to find reviews online about any business. These reviews can be found on the BBB website, Google reviews, and social media platforms.
Reviews are like a window into the soul of the business. These windows will show you whether they’re trustworthy or not. The experience of reading a review is invaluable because it helps bring you closer to knowing what kind of company it really is and if they meet your needs.
5. Inquire Whether the Business is Registered in Your State
One sure way to see whether a business is legitimate is to check whether it is registered or not in the state where you live. Loan companies that are registered with the state have been vetted by your government and will provide you with better peace of mind than those who aren’t. Before taking out any type of loan from an online lender, check with the Secretary of State website of the state where the business is supposed to be registered.
6. Verify the Company’s Address and Physical Location
Sometimes, a company’s website may look very professional but that does not necessarily mean that a business is legitimate. If you want to further verify whether a company is legitimate, what you can do is verify the address listed on the website.
Does the business have a physical location or is the address listed just a P.O. Box number? If there is a physical address listed, you can key this in on Google Maps to see whether they actually have an office in that location. Legitimate businesses will usually have photos on Google Maps that show the actual business location or physical offices.
7. Give them a Phone Call or a Visit
While investigating online can give you a lot of clues on whether a business is shady or legitimate, checking the old-school way can still be beneficial. Take a few minutes to call the phone number indicated on the website during business hours. Is there someone answering the phone? If somebody answers, talk to the person to learn more about the business.
If the business location is near where you are located, you can also try visiting their offices to see whether they are actually located at that address. Many scam companies usually put up temporary offices so you should also be cautious about this. If you are in the office location, check whether it is furnished properly. A sparsely furnished office that looks very generic can be a sign that they are not really based there. Another tip is to ask nearby or neighboring businesses whether the company has been in that location for a long time or if they are just there temporarily.
8. Be Wary of Time Bomb Offers
It is not uncommon for companies to use “limited time” offers to sway customers to agree on a loan offer. However, you should be cautious if the lender puts too much pressure on you without giving you sufficient time to decide. This could be a sign that what you are being offered is a scam or you’re being lured into a debt trap.
When you encounter a loan company staff who is using this pressuring tactic on you, don’t give in or be tempted. Instead, ask more questions and clarifications. Tell them that you are considering another lender and you need time to decide on their offer. By not acting impulsively or giving in to the pressure, you will also have enough time to read the contract.
9. Always Read the Fine Print
Are you one of those people who hates reading terms and conditions? Don’t worry because you’re part of the majority. According to a social experiment, only 1% of people read terms and conditions. The problem with this is that many people then end up signing things that they don’t understand.
This issue also applies to loan companies. Many people who are in dire need of cash fail to read the fine print because they are in a hurry to get the money. If an offer is too good to be true, don’t immediately think that you just hit the jackpot. Make sure to read all the terms and conditions before taking the loan offer.
Finding Legitimate Loan Companies
Remember, you can never be too careful when it comes to money. You might think that going through all these steps can take a lot of time and effort. However, doing your due diligence from the beginning will not only save you a lot of money but also save you a lot of headaches and frustrations in the long run.