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Using the internet makes everything easier and faster, even money lending. Thanks to this development, there are many reliable lenders online nowadays. Unfortunately, the same growth also paved the way for shady lenders who take advantage of borrowers. There are a lot of cases where people borrow money online but get scammed instead.
To not fall prey to them, it’s best to secure your information and finances and deal only with a reliable lender, and the rest will follow.
4 Legitimate Tips To Safely Borrow Money Online
It’s also important to know about the safe ways to borrow money online.
1. Know what type of loan works for you
Before looking for a lender, the very first thing you should determine is where you will use the money you will borrow. You might use the money to start a business, to pay for your car repair, to make a big purchase, or for emergency medical bills. Next, you should also examine how you will pay for your loan. Understanding your finances will help you determine what type of loan and amount of money you should look for.
The most common type of loan is a personal loan. It is basically the money you borrow for any purpose that floats your boat. Here, you will pay back the money with interest in monthly, weekly, or bi-monthly installments, depending on the loan’s terms and conditions. This loan usually takes 2-5 years to pay off.
Most personal loans are unsecured, so you don’t need to provide collateral to secure your loan. Here, the annual percentage rate (APR), or interest, can range from 6-36%, depending on your creditworthiness. If you stack a good credit score, you will most likely get a personal loan with a lower interest rate.
The second type of loan you can get is a quick cash loan. This loan is short-term, fast-moving, and is usually unsecured. Since the loan is short-term and with no collateral, the lender can charge a higher interest rate. The most common quick examples of cash loans are payday loans and credit card cash advance. This loan is perfect if you need cash immediately for any unexpected expense.
The third type of loan you can get is a bad credit loan. This loan is helpful if your credit score declines and does not qualify for traditional loans. Here, the loan is either secured or unsecured. If you cannot set up collateral, then the collateral would be your salary statement. It’s easier to get a secured loan as the lender, in this case, has a bad credit score.
The fourth type of loan is a debt consolidation loan. Your loans are combined for one single monthly payment. Here, there is a chase that your loan’s interest rate is lower than the one charged on your credit card.
This loan will help you keep up with your loan payments and consolidate various loans with different interest rates and payment schedules into one. Taking out this loan will help reduce the amount you pay for debts and wipe out any credit card debt with high-interest rates.
Now that you know the types of loans you can get online, it’s easier to assess which one suits you best. You should consider your payment capability, what collateral you want to set up, the interests that work for you, and the payment term.
2. Pick the right lender.
Choosing the right online lender is as important as knowing what type of loan you want to get. With so many lenders offering their services online, you might confuse yourself with which lender to choose.
There might be lenders that excel or specialize in the type of loan you want to get. This is one of the most important aspects of online lenders. Knowing the specialty of each lender enables you to get the best offers and services on their specialization. It is also a chance to talk with experts who have deep knowledge of their specialized loans.
The next thing you should know is whether the lender is transparent or not. You should know whether the lender you are checking out is transparent with their terms and conditions and fees, with no hidden charges. It would be best to transact with a lender that shows all the necessary details about the loans they offer.
Lastly, you should know the experience of the lender on lending money. The best way to determine such is through reviews online. You should borrow money from a lender that has good reviews and vast experience in lending.
3. Stay away from payday loans.
Some consumers rely on payday loans in managing their finances and income volatility. Its concept is straightforward – you will borrow an amount with interest, which should be paid when your next paycheck arrives. You don’t need to worry about additional fees if you can pay for the loan on time.
However, those who cannot pay for a payday loan are rolled over to a new term. Lenders will extend the loan and give the borrower a new due date. Thus, borrowers should make sure that they pay the loan before the due date to avoid the roll-over.
Nonpayment on the original due date will keep the borrower stuck in a debt cycle. Rolling over means additional fees, making it more difficult to pay off the loan. Therefore, if you cannot pay the loan within 30 days, it’s better to resort to other types of loans with better payment terms.
4. Watch out for any red flags.
Keep your eyes open for red flags about the lender you’re dealing with. If the loan offer is too good to be true, then you might have to step back and reassess. If you’re paying too much for fees and interests, then your lender might be a bad lender.
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Borrowing money online has been the trend for quite some time since online loans are fast and easy. However, it is important to take precautions too. Know the type of loan you want to get, shop around for the best lender, and watch for red flags.