How to Choose Between Online Lenders for an Emergency Loan

With the increasing number of lending sources and the ubiquitous risk in web security, finding and choosing between online lenders can be a tough call. But in times of financial urgency, such as unforeseen medical bills or vehicle repairs, an online loan may be the only viable option for fast financial assistance. Here’s five things to look for in a legitimate online lender.

Signs of a Potential Scam

As important as it is to know what makes up a legitimate online lending company, you have to know the telltale signs of scammers. Predatory strategies are common in the world of online lending, as operators of these elaborate schemes know for a fact that borrowers are desperate for an immediate financial solution. Legitimate brokers or lenders should offer loan repayment conditions upfront. They should also have a physical address and display disclosure notices on their respective website.

Minimum Requirements

Legitimate online lenders impose a set of minimum requirements for applicants. Any reputable lending organization wants to know what the risk connected with the loan is and use that as a basis for designing their loan contracts accordingly. Your credit score is usually the first thing that these institutions look at. Bank statements and/or business projections, if you are applying for a small business loan, are also common tools that lenders use to gauge your risk profile. Minimum requirements serve to control the level of risk that a lender takes on by limiting the applications that go through approval. If your prospected online lender does not impose minimum requirements and seem too eager to get your business, this should spark some concern as to what their true motives are and if they are indeed legitimate.

Ease of Reach

Online lenders have the business structure and cash flow to operate with a customer support team. You should be able to reach them when needed either via their website, a hotline, or email account. Many online lenders have no physical presence and may be headquartered overseas. This means your only bridge of communication is digital. Without an up-to-date website or a phone number that works, the application and ongoing monthly payments can be a tedious process. Choose a lender with a strong online presence that’s distinguishable the minute you contact them.

True Cost Comparison

The only accurate way to compare emergency loans is to look at their respective annual percentage rate, or APR. This metric takes into account the total cash value you’ll need to repay including the interest rates and fees. Loan fees are perhaps the trickiest since they can appear to be infinitesimal but can actually accrue into a large sum of money over the loan’s life cycle. Typically, merchant cash advances impose the highest APR and repayment time frames are generally on a daily or weekly basis. Term loans online also have comparatively higher APRs versus traditional bank loans, but are generally lower when compared with merchant cash advances.

Cash Availability

As the title suggests, this is a guide for finding a loan as quick as possible. Financial emergencies, if uncontrolled, can lead to more disastrous consequences. Check how quick the loan application process is from your chosen lender. Some may take as quick as two hours to get an answer, be it an approval or rejection. Others, however, can take as long as a week to reply. The latter, of course, is not the best option if you’re in dire need of cash. If approved, it usually doesn’t take long to receive the money since it is done via wire transfer.

Financial emergencies can be stressful times. Amidst the ensuing panic, you are at your most vulnerable against loan sharks and scammers who aim to make a quick profit from exploiting your desperation and frustration. The five tips above should help you distinguish trustworthy online lenders from the dozens of illegitimate agencies set up to steal your information and what’s left of your finances.