Business loans are important for many businesses, especially startups. However, if you aren’t careful and diligent enough to know and understand your prospect lending institution, then you can fall victim to many financial scammers.
Most scammers take advantage of business owners who have just started their business and who don’t have enough knowledge and expertise on how the process works or what to expect. Because of the widespread alternative business funding you can choose from, it becomes challenging to filter out genuine lenders from fictitious ones.
The world has changed drastically. You can now access banking online, online lending institutions, brokerage accounts, and other related lending alternatives. Just as there are various lending options to choose from, seemingly, there are also as many financial scams designed to deceive people.
Aside from that, financial scammers are prevalent in today’s society because of the increase in technological advances and development. Their schemes and conspiracies also upgraded, given the new advancement.
With the widespread occurrence of scammers, borrowers should be extra careful and diligent when transacting business with lending institutions. Fortunately, you can avoid getting scammed by these shady alternative lenders.
Here is the list of things you need to take note to avoid getting scammed:
Pick the right one for you
Before engaging with a lending institution, research, and thoroughly understand your prospect lender. It helps to check reviews of its clients to get a better picture of what to expect. But remember to filter out information coming from the internet. You might be reading fictitious reviews only or made-up experiences of their so-called clients.
At the end of the day, it is still safe to borrow from a lending institution that was referred from someone you trust. You can ask for referrals from your family or friends. At least, with their first-hand experience with such lending institution, you would know what to do. You become more confident and secured to borrow if you know better.
Spot the difference
There is a huge difference between legitimate lending institutions from financial scammers. Aside from the regulatory permits and licenses that a legitimate lending institution can present, there is a significant contrast between the two.
You should know the company’s representative, physical address, public contact number, and license number. Once you know this information, call the phone number to make sure that you can reach it, and it is true. Aside from that, match the license number with the name of the company. You can also search for the name of the lending institution and look for any red flags and warning signs.
One of them is that there is never an upfront payment you need to give to a lender or broker. Even how reasonable they seem, loan brokers are only paid after the deal is done and not the other way around. There are origination fees or costs or processing fees along the way, but these fees don’t cost significantly.
Take note that these are only charged once your loans are already funded. Other than that, legitimate lending institutions never ask for a downpayment before approval. It only invalidates the reason for the borrower to get a loan if he or she is the one to make a downpayment.
Legitimate lending institutions don’t offer loans with a cold call. Whether it is through emails, phone calls, text messages, or social media, legitimate lending institutions don’t resort to this. Always be aware of the services that pop up that you didn’t ask for because these are from financial scammers.
Detect early warning signs
Even how hard financial scammers hide their identity, there are warning signs or red flags that can help you recognize it. When you are looking for a lending institution, pay close attention to how they operate or how they handle any information you give.
Included on these red flags are upfront fees and downpayment, guaranteed approval, unparallel company information or address, unprofessional services, etc. If ever you encounter these red flags, you might want to find a different lending institution right away.
Be wise at all cost
Borrowing funds can cost more than what you expect if you are not careful and meticulous in dealing with lenders. Be wise when getting a loan, especially if you don’t exactly know the lending institution you are association yourself with. It is better to engage in safe borrowing.
It means that you borrow only as much as you need and can afford to pay. Right lending institutions that give the right solution for your financial needs present the best loan option for you. However, you have the right to borrow at your own pace and capacity. Even if you think you can afford to pay now, you never know what might happen in the future.