Getting a loan is not new for many of us since we look for more convenient ways to get extra cash for emergencies, school fees, home renovations, vacations, weddings, or simply survive till the next paycheck. With the increasing demand for quick cash loans, banks still remain stringent with their requirements.
Fortunately, there are now money lenders who give loan solutions to most people who do not have collateral. However, with the rise of licensed money lender cash mart is also the rise of the infamous loan sharks. Unfortunately, loan sharks can now post as legal lenders to fool the unsuspecting borrowers. Here are five things to watch out for when applying for a loan.
Unregistered Lending Business
When getting a loan make sure that the lender is included on the official list of licensed moneylenders. They need to have a licensed to operate as a money lender. There are some companies who flaunt that they are registered only to turn out that they have a different company description in their registration.
Borrow only from licensed money to make sure that you will get the best loan deals and you are protected from unfair practices.
Application is Too Easy
There is a reason why money lenders ask for proper identification documents, proof of billing, and a proof of income. Put yourself in the shoes of a lender. If a stranger comes up to you to borrow some cash. You would want to validate the person’s identity. Add to that, you have to make sure that the person has the ability to pay for the loan amount and the interest charge. Finally, you would want to know where this person lives so you can validate his cost of living and you would know where to find him in case he failed to pay up.
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Getting the right information and documents is also vital for the lender to know if the borrower is creditworthy. Now, wouldn’t it be fishy if the lender only asked for one ID card and you immediately got approved? You better check the interest rates and loan terms if that’s the case.
Outrageous Interest Rates
Loan sharks charge more than 20% of interest rates. A loan shark promises to give the money right away if only you accept the sky-rocketing interest rates. Sadly, this is the reason why a lot of people are now having a hard time getting out of spiraling debt.
Unclear Loan Terms
A licensed moneylender will always clarify the agreed payment schedule, require payment amount per installment, and the maturity of the loan. They want to make sure that the borrower understands his responsibilities and the consequences of not paying on time.
Reputable lenders encourage their borrowers to pay on time and build a good credit history with them. This is why many of them offer a faster loan process for their long existing customers. They also increase the loan amount if the borrower proves to have a positive payment habit.
On the contrary, a loan shark will not clarify the payment terms since they would like you to default and pay more interest and penalties.
A lot of loan sharks have no contract at all. This is a big red flag to watch out for. On the other hand, there are some loan sharks who draft incomplete contract with unclear loan terms. Be careful when signing such a contract. Many of them have provisions that you may not notice. These provisions will prove to be very problematic in the future.
In case you receive a loan contract, make sure to read every term and ask for clarification if you do not understand something. A legitimate lender will be happy to explain everything to you. Look for transparency at all times.
If you have been threatening or if the lender used intimidation for you to sign the contract, it means that you are indeed transaction with a loan shark. A licensed lender will never force a borrower to commit to a loan that they are not sure about. You should also have your own copy of the loan contract.
Your personal documents are vital when making legal transactions. No licensed lender is permitted to retain any original documents from you. They should also not get your ATM card.
Asks for Upfront Fees
A licensed lender will never ask for any upfront fee to guarantee your loan approval. A loan process is done with due diligence to know if the borrower has the capacity to pay the loan on time. There should be no 100% guarantee that you will be approved.
Processing fees will only be charged once you are approved. It will be either deducted from loan proceeds or it will be added on top of your principal loan together with the interest rate.