How Safe Are Online Loans?

An online loan is one of the easiest ways to quickly and conveniently obtain financing. It’s a great solution to overcome a financial emergency, consolidate debt, pay for a new purchase, get a mortgage, fund a vacation, or even support your business. It’s also a handy option if you have less-than-perfect credit and keep getting turned down by traditional banks.

However, the largely impersonal nature of the process leads many people to ask — are online loans safe? How do you know if a lender is legit and above board?

The fact is, online lenders are just as safe as in-person lenders; there are simple signs you can look out for to spot an untrustworthy lender. Here’s everything you need to know about securely obtaining an online loan.

What Is an Online Loan?

As the name suggests, you can apply for an online loan without having to personally approach the lender. Every step of the process, including pre-qualification, application submission, funding, and repayment, is done online. You can secure one from online-only lenders or even traditional banks. However the former can usually accommodate a larger variety of applicants.

Just as with banks, online lenders are also regulated entities with a license to offer consumer financing, making online loans entirely safe. The difference is you don’t have to personally visit a bank, which can be convenient if you live far away from it or simply can’t make it there.

Benefits of an Online Loan

There are a host of benefits to opting for an online loan, all of which can make it a much more convenient and valuable experience for you.

• Prequalification: Some online lenders conduct a soft credit check and can pre-approve you to apply for an online loan by providing an eligibility ID or access code. This lets you check your borrowing limits and potential interest rate before you apply for the loan.

• Fast Approvals: Online lenders often work faster and offer rapid approvals, allowing you to access the funds you need quickly and safely.

• Lower Interest Rates: The right lender can procure safe online loans with highly competitive interest rates that make repayment easier for you.

• Imperfect Credit Is No Bar: Traditional lenders often focus only on credit score, history, or income, whereas online lenders will take into account alternative credit data like utility payment history to make lending decisions.

Identifying Trustworthy Lenders

Background checks go both ways and good online lenders will know that. They will make it a point to provide you with as much information as possible so that you can check them out and know that your online loans are safe. Here are some of the signs of a legit lender.

• Lending License: One of the first things you should look up is the lender’s registration with the state’s banking regulator. Ideally, the provider should have a copy of their license and registration number listed on their website for you to verify.

• Certifications: As with all businesses, lenders will also be affiliated to industry bodies and have a presence on online platforms, such as the Better Business Bureau. These bodies tend to have their own screening processes and often have customer feedback you can browse.

• Customer Reviews: Check out customer reviews for your lender on as many different platforms as possible, whether that’s their website, Google reviews, as well as review platforms like Trustpilot and Consumer Affairs. Plenty of positive online reviews on multiple platforms are a good indication that your online loans are safe.

How To Spot Scammers 

Try as they might, fraudulent lenders will always exhibit some telltale signs that give them away. Here are a few.

• Loan Offers: While pre-qualifications or invitations to apply for a loan are very common and entirely above board, loan offers are not. If someone contacts you first and outright offers you money, it’s a sign that they are not safe online loan offers.

• Application Fees: Legit lenders will never ask you to make any sort of upfront payment, such as an application fee, before you secure a loan from them.

• Negative Reviews: If you come across a host of negative reviews on platforms, sometimes buried deep beneath a tranche of positive reviews, it may be a sign of something fishy.

• Pressure Tactics: Quality lenders will always work with complete transparency and give you the time and space you need to make your own decision. If a lender tries to force or influence you into choosing any one option over another, it may not be a safe online loan offer.

Partner With Lending Tower

Lending Tower is a licensed consumer finance lender based in Newport Beach, California and a trusted financial partner to thousands of customers across the U.S. We are a Better Business Bureau-accredited lender without a single complaint on the platform. Benefit from a quick, hassle-free application process and highly competitive rates. Speak to one of our loan advisors 24/7 for quick answers to your most pressing questions and learn more about safe online loan practices.