Direct lenders offer borrowers the ability to take on debt in various forms — such as auto loans and mortgages — to make purchases they otherwise wouldn't have the cash to afford.
As with anything involving money, however, scammers often try to imitate legitimate online loan direct lenders. By doing this, the scammer can gain access to a borrower's personal information.
Scammers can gather information ranging from a would-be borrower's name and address, to their Social Security number and bank account information.
Below are several ways to tell if a lender is a scammer. But before that, it's essential to know the benefits of direct lenders.
Benefits of Direct Lenders
Minimize the Spread of Borrower Information
When a borrower uses a loan aggregator, they give their information to a large group of lenders. Consequently, their phone might start ringing constantly, and their email inbox could become full of pushy salesmanship.
Plus, the more institutions with a borrower's data, the more risk the borrower faces of having their data exposed in a data breach.
On the other hand, working with direct lenders minimizes the number of institutions with the borrower's information.
A Simple Application Process
Applying for a loan through a direct lender is typically a quick and straightforward process. The application is relatively short, and there aren't any confusing questions. Borrowers often just have to provide some basic personal information and information about income and employment status.
Faster Approval
Many direct lenders make approval decisions almost instantly, as they have systems in place that can auto-approve the borrower if the borrower meets certain criteria. This is faster than having to go through a loan aggregation service, which may take days or weeks to match people with an appropriate lender.
How To Tell if a Lender Is a Scammer
Loan Approval Guarantee
Scammers lure in borrowers with poor credit by promising a guaranteed approval.
Legitimate lenders don't promise loan guarantees, as they are taking a risk every time they lend to anybody — good credit or otherwise.
That said, there is a process called prequalification. A prequalified offer tells a borrower that they're most likely able to receive the rates and terms in the offer. Borrowers should seek these out to identify their top loan prospects.
However, prequalification isn't a guarantee. The borrower must still formally apply and may have to agree to a credit check.
This is different from "guaranteed approval" scams, where the lender tells the borrower they'll give them a loan guaranteed without any sort of formal income or credit verification.
State Registration
By law, lenders are required to register and/or obtain a license in every state in which they do business. Borrowers can check their state's Department of Financial Institutions website to see if the lender in question is registered.
Now, scammers try to get around this by claiming they are not in the US or don't have to register because they lend online. This is not the case no matter what. They are merely trying to fool the borrower into falling for their scam.
Upfront Payment
Real lenders don't charge borrowers a single penny in fees until they've handed out the safe online loan. Borrowers should avoid any lender that demands an origination fee or something similar before official loan approval.
High-Pressure Sales Tactics
One of the most telltale signs of a scam is high-pressure sales tactics. Scammers will give borrowers a very short deadline to make a borrowing decision, hoping to prey on the borrower's need for cash fast.
Trustworthy lenders don't pressure borrowers into taking out loans, as it's a big decision for both parties.
Notice: Information provided in this article is for informational purposes only. Consult your financial advisor about your financial circumstances.
Press Release Service by Newswire.com
Original Source: Why Scammers Try to Look Like Direct Lenders — and How to Avoid Them
