Tips for Online Borrowing
Get the money you need without leaving home
June 21, 2013 by Mark Dye
When it comes to borrowing money online, a customer needs to be educated and ready to ask key questions regarding the transaction. There are several quick and easy steps you can take to ensure that your transaction goes smoothly, and that the money you need today won’t come back to haunt you tomorrow.
Our best Tips:
- Is it a “real” company, or just a website—Legitimate companies and sites will have an actual physical address. This “real life” contact information (a physical address and/or telephone number) should be easily found on their site. But don’t just take their word for it—call the number or check online yellow pages to ensure that it’s not fake.
- Location, location, location—Even if the company has a real address, make sure the company is incorporated within the United States. Doing so allows you to take advantage of the appropriate federal (and even state) lending laws and legal protections.
- Does the lender conform to the Truth in Lending Act and Reg Z—Always make sure that the lender tells you what your interest rate and Annual Percentage Rate (APR) will be before finalizing the agreement. Since all rates should be based on your credit history, the rate should not automatically be the same for every borrower. If the lender doesn’t tell you the rate—or does not disclose it clearly—it is best if you walk away and find a more upfront and honest lender.
- Does the company offer paying by allotment—Paying by allotment is easier, faster, and prevents you from losing or forgetting a bill during a move. It is, however, illegal for a lender to make it a requirement and should never factor into a loan decision. Just remember that if given the option, it can be a great benefit.
- Make sure the site is safe and secure—There are two ways to tell if the site you are using is secure once you begin the application process: 1) There should be a yellow “padlock” icon at the bottom of your browser window that indicates you are on a secure connection; 2) the web address should start with “https” instead of just “http.” Also, depending on the browser you are using, you should get a “warning” window informing you that you are using a secure web page.
Also see if the site conforms to any other security standards or has any other certifications, such as TRUSTe. While it is voluntary for companies to add these extra layers of protection, those that do are normally ones that take security seriously.
- Look for a satisfaction guarantee—Any company confident in its product will offer some type of no-questions-asked satisfaction guarantee. Lending should be no different, especially when you consider the impact a bad borrowing decision can have on your finances.
- Be cautious with peer-to-peer lending—“Peer-to-peer” borrowing is when one person loans money at an agreed upon rate to another person, all facilitated through a website. But those sites are based upon trusting an individual you don’t know, who may or may not have your best interests in mind, and may not use your information in a legal and ethical way. They also don’t have to conform to federal lending laws. While you shouldn’t necessarily write these sites off, do be cautious if you use one.
- Check for financial education—Legitimate lenders want consumers to make smart long-term financial decisions. By making financial information and educational materials readily available on their site, these lenders recognize the importance of protecting not only potential customers, but themselves as well.
- Protect your credit—Whatever online lender you use should report your positive payment history to at least one of the major credit reporting companies (Experian, TransUnion and Equifax). This is important because some lenders will only report negative items. If possible, ask the company what their reporting policies are by phone, or even by live chat if offered. Beware of companies who do not do any credit reporting at all.
While these tips are in no way all-inclusive, they are easy to follow and can help secure your transaction. Using the Internet to borrow money is a very convenient option that has many benefits. It is important, however, to do some simple homework to ensure that you are dealing with a reputable company. Doing so may not only help you get the money you need, but also start a long and beneficial relationship between you and your lender. And all from the comfort of your own home.