Featured article by Cynthia Madison
Image source: https://unsplash.com/photos/FlPc9_VocJ4
Back in the day, getting approved for a loan involved taking the following steps: visiting the bank or the financial intuition in person, talking to one of their representatives about your requirements and options, filling out a ton of paperwork, and then waiting for a (hopefully favorable) answer. Although this course of action remains valid to this day and there are people who actually prefer to do things the old-fashioned way, the process of applying for a loan has been greatly facilitated by tech advancements and the advent of the internet.
It seems that these days we are living most of our lives online: we take to the internet to work, study, shop, communicate, have fun and do myriad other things that were once limited to the physical world. So, why not borrow money online as well? It makes perfect sense that as we’re moving towards an increasingly digitalized society lenders have transitioned to the virtual environment and started providing their services online.
However, applying for a loan is not the same as ordering a pair of shoes from your favorite retailer or chit-chatting with your friends on WhatsApp. The stakes are much higher in this situation – you have to provide sensitive information to someone you’ve never met before and trust they will provide honest and reliable services. Besides, we all know that the online landscape is brimming with hidden threats and the risk of falling victim to an online scam is real.
It’s no surprise a lot of borrowers are wondering whether online loans are safe or not. Despite our increased reliance on digital tools and apps and the relatively high level of tech-savviness we’ve reached in recent years, it’s not uncommon for people to have second thoughts about applying for online loans. Therefore, it’s worth exploring the subject further and finally laying these concerns to rest.
The pros and cons of online lending
Due to the convenience that they provide and the ever-present trend of digitalization, it’s easy to assume online loans have all the perks and zero drawbacks. However, keep in mind there are always two sides to every coin, so it’s only fair to take a look at both the advantages and the disadvantages that online loans provide.
Let’s start with the pros. We’ve already briefly mentioned convenience as one of the main advantages – think quick and easy application, no need to visit the financial institution in person, streamlined process, the ability to compare multiple lenders with just a few clicks or taps, and decide which offer works best for you.
Online lending also provides borrowers with a much wider range of options. Apart from finding all types of loans online, from mortgages to student loans and everything in between, the chances of securing a loan online despite having a bad credit history are much higher, not to mention you can get great interest rates and terms if you’re willing to do a bit of research.
Another great thing about online lenders is that most of them provide information on their approval requirements, so you can get pre-qualified with multiple Canadian lenders without impacting your credit.
Now let’s move on to the cons. For starters, a lot of reputable online lenders can be just as picky as branched-based lenders when it comes to selecting their clients, only accepting borrowers with great credit history and low income-to-debt ratio. In this situation, trying to secure a loan from your bank or credit union might be a better idea.
Another aspect to consider is the online application process itself. If you’re not comfortable filling an online application form on your own, without someone guiding you and explaining every step of the process in person, applying for an online loan, and then, in case your application is approved, managing it online might result difficult.
On top of that, once you start applying with different online lenders, you’re in for a long string of calls, emails, and offers from lenders, even if you decide against borrowing money online or you’ve already taken out a loan.
So, are online loans a safe option?
The answer is yes, but it’s not as black and white as some may think. The safety of online loans much depends on the borrower’s savviness and approach when selecting their online lender. It’s not as simple as going online and randomly picking a lender, without doing any prior research.
While there are many trustworthy lenders out there that provide great services, comparable to those offered by brick-and-mortar institutions, there are also a lot of bad players lurking on the internet, looking for an opportunity to scam borrowers. So, when you search for online loans, make sure you pick a legitimate and reputable lender if you want to avoid any unpleasant surprises.
How to choose the right online lender and protect yourself against scams
The obvious question is how do you know if a lender is legitimate or not if you’ve never applied for an online loan before? If you’re new to the world of online lending, here are a few tips that will help you find the right online lender and stay safe:
– Referrals from family members and friends – referrals are always helpful, as they come from trustworthy sources and can point you in the right direction
– Online research – try to find as much information about the lender as possible by running a search on Google. Start by reading about the company on the Better Business Bureau (BBB) website and other sites where you can find reviews from previous customers. Then scan their site and keep an eye out for any red flags, such as missing contact information, guaranteed approvals, offers that seem too good to be true, requirements to pay fees upfront, etc. Also, check if the lender has ever appeared in the news and how it was depicted.
– Contact the lenders – talks to one of the representatives and ask for additional information on their offerings and services. If anything seems off, abort mission and move on to the next candidate.
To sum things up, although the online environment does come with risks and threats, and not all online lenders are to be trusted, you can apply for online loans safely as long as you do your due diligence and keep an eye out for red flags.
Cynthia Madison
Journalist and blogger, lover of all things tech, focused on bringing the latest news and information in the industry and helping people navigate this fast-changing digital world.
