Updated: Nov 18, 2021
It's incredibly important to pick the right personal loan lender. This person is someone that will work closely with you for a long time. There will be a lot of money changing hands, and there will be plenty of "customer service" interactions. So it's important to work with someone you can trust and a loan that's actually best for your needs. Research and comparison shopping is definitely the key.
Here are red flags that you should be aware of in order to avoid personal loan lenders not worth your time or money:
RED FLAG: The Loan Terms Have Not Been Explained in Detail
Loan terms matter, because the overall cost of the whole situation is directly attached to them. Make sure that you work with a personal loan lender who will define interest rates and repayment terms. These have to be explained in detail and properly during the application process early on. For example, for the interest rate on the loan, is it a variable rate loan or a fixed-rate loan? The variable rate loan, for example, will lead to a higher interest rate.
It's important to find out other crucial details as well, such as the rate adjustment period, the maximum rate and payment, and so on and so forth.
Ask all the questions you can think of during this stage, too.
RED FLAG: There Are Plenty of Consumer Complaints against or about the Lender
Dealing with customer problems aside from loan management should be something that comes easily to a personal loan lender. Unfortunately, there are some people who only excel in one of them. However, there has to be a balance struck between the two at all times.
The last thing you need is a lender who will make taxing situations like loan repayment even more stressful. Don't work with someone that has a history of negative issues that are quite concerning. To be sure, look up the lender you're considering by name in the Consumer Financial Protection Bureau's Consumer Complaint Database. Take their rating on the Better Business Bureau and consumer reviews online into account.
Working with someone that's properly reputable is your best bet.
RED FLAG: You’re Suddenly Dealing with Hidden Charges
Honesty is the best policy in every situation of a person's life. This is particularly true for the fees that lenders charge. It's necessary so that a clear comparison between loan costs can be made from the get-go. Be on the lookout for "late fees", "origination fees", and "prepayment penalties."
This is not to say that a higher fee is acceptable in certain situations, like when there's a considerably lower interest rate involved. Borrowing from a lender that doesn't give the full picture upfront will absolutely create problems down the line.
There are many personal loan lenders out there these days, but it's important to choose the right one. Working with the wrong lenders can lead to expensive, time-consuming, stressful problems at some point. Red flags include sudden hidden charges, several consumer complaints, and loan terms not being explained in detail. Take note of these red flags when looking for the right personal loan lender.
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