Why online loans may not be the answer
Let’s face it: If you’re strapped for cash and need a loan, you want to be able to get it quickly. And that’s the reason why so many people turn to loan websites for their answer. Depending on your situation, loan websites may be beneficial to you. However, not everyone has the best luck with them. Sometimes, you risk losing a lot more than you’ve gained, and it’s smart to be aware of the cons when dealing with these kinds of sites.
For example, Lending Club, a peer-to-peer online lending company, connects people who need a loan to people all over the country who have the money to lend. However, many borrowers have run into several problems. One common issue is that they require a credit score of 640 to be considered for a peer-to-peer-loan, otherwise the application will be automatically denied.
In addition, the interest rates tend to be fairly high, as well as the monthly payments. For instance, sometimes loans can be as high as $35,000, and the monthly payment can be around $1,000, which is not something most people can afford comfortably. In addition, many online loan websites only offer loans in certain states.
Another loan website to watch out for is MoneyMutual. When you apply for a loan through this website, MoneyMutual sends all of your information to hundreds of lenders, who will then contact you in all sorts of ways with a typically overpriced loan.
“This site is nothing more than an aggregator of payday loans. All of these lenders charge outrageous rates and crazy fees that you probably missed in the fine print,” says Maxime Rieman, NerdWallet’s senior financial markets and insurance analyst. “Users report being charged membership fees that they never agreed. Sometimes there’s not even an explanation for the fee.”
Payday loans are definitely something you’d rather avoid.
“A payday loan can be approved within a matter of hours and there is typically no credit check,” explains Theodore W. Connolly, author of The Road Out of Debt. “Usually, you write a personal check payable to the payday lender for the amount you wish to borrow plus a fee. The check is dated for your next payday or another agreeable date within the next couple of weeks when you figure you’ll be able to repay the loan.”
It may be easy money, but in the long run, you’re probably going to pay much more than you were lent.
“You will most likely end up paying three, four or even 10 times the amount you originally borrowed. Debt created by payday loans will often quadruple in just one year,” says Connolly. “One tiny mistake can mean lifelong debt.”
If you need a loan, the best place to go is your local financial institution. No matter what kind of loan you need — home equity loan, auto loan, student loan, personal loan — your financial institution is the most practical and personal way to receive a loan. Call or stop by today to find out how we can help you get approved for a loan.Used with Permission. Published by IMN Bank Adviser Includes copyrighted material of IMakeNews, Inc. and its suppliers.