Due to the coronavirus pandemic, many individuals and families continue to face financial difficulties. The economy is yet to recover from the blows it suffered in the past year. Most people are out of a job, so they turn to personal loans to support themselves and their families.
Sadly, personal loan scams appear to be prevalent even during these times of hardship. As people grow more desperate, they fail to take precautionary measures in protecting themselves before applying for loans. As a result, they fall victim to loan scams.
So, to help prevent others from becoming prey to creditors who exploit those in need, here are a few warning signs you have to remember when applying for a personal loan.
1. No Proof of State Registration
Every loaning company must be registered in the state they are operating in. Do not apply for loans in agencies that cannot show proof of state registration. At the same time, be wary of finance companies operating within a particular state despite being registered to another. Laws differ in every state. Thus, it’s best to stick to creditors registered in your state.
2. Short Repayment Time Frame
People apply for loans for various reasons. Some use it for emergency purposes, while some use it for big-ticket purchases that they need. Nonetheless, the goal of a loan is to provide financial assistance by issuing a large sum of money to be paid off within a reasonable timeframe.
Personal loans tend to have a shorter repayment timeline than other types of loans. However, it would still be best to steer clear of creditors that set repayment deadlines within a week or a month of borrowing money.
Most of these loans boast of a fast approval process, which makes it enticing for customers in dire need of money. Unfortunately, it might lead you to get trapped in a cycle of taking out loans again and again since you cannot afford to make payments in a short period.
3. Questionable Origination Fees
Most of the time, personal loan lenders do not charge any origination fees, but there are a few reliable ones that charge a small amount of fee initially. However, do take note that origination fees must not be equivalent to a large chunk of your loan amount.
If a creditor charges you a high origination fee, don’t push for the loan application anymore. If you’ll think about it, it’s questionable for a loan lender to charge a high cost at the start. After all, what’s the point of borrowing money if you’ll be asked to pay before you can even borrow?
The Bottom Line
When applying for a personal loan, you must not be swayed by frivolous promotional tricks by loan creditors. No matter how much you need the money, take your time in deciding on a lender. Do your due diligence and make a shortlist of local lenders that you can trust. If a deal or an offer sounds too good to be true, then you’re better off looking elsewhere.
Are you in need of personal loans for bad credit in Birmingham, AL? Here at Mid-Town Finance Company, we are passionate about helping our clients overcome difficult financial situations. If you are searching for a reliable loan lender that offers installment loans and small loans in Birmingham, AL, contact us today!