How to Check if a Loan Company is Legitimate

 
04/09/2019



If you’re trying to expand your business, getting a business loan might feel like a necessity. But if your credit isn’t in great shape, you might not have a wide selection of lenders from which you can choose.

While bad credit business loans exist, there are plenty of scammers who are out to take advantage of business owners they think might be desperate. As a result, it’s important to know how to check if a loan company is legitimate. Here are some tips to help you spot potential red flags.

How to check if a loan company is legitimate

Before you apply with a lender, think about these steps to make sure you don’t get caught up in a scam.

Check for an online presence

If you get an offer for a bad credit business loan, ask yourself if you’ve ever heard of them before. If not, do an internet search for the company name. Even if it’s relatively new, it should have a profile on websites like Crunchbase or Owler and possibly even reviews from existing customers.

If you can’t find anything — or worse, you find information that points to a potential scam — you’ll likely be better off passing on the offer.

Check with the Better Business Bureau

Even if the loan company has an online presence, that doesn’t necessarily mean that its operations aren’t predatory. Check the Better Business Bureau website to learn more about whether the lender is worth working with. You’ll typically see a letter grade from A+ to F, along with reasons for the grade.

In some cases, you’ll also be able to read customer reviews, which can give you a better idea of what to expect. If you find that the lender wouldn’t be a good fit, you can also use the website to find one that might be a better one.

Check your comfort level

Lenders want your business, but they’re not desperate for it. If you feel like your contact with the company is overly aggressive or manipulative, it might be a sign that they’re trying to fluster you and make you feel like you need to make a decision before you get all the facts.

If you feel uncomfortable about the process at any time, take a step back and consider why you feel that way and whether you should continue.

Check with the state’s attorney general

If most everything checks out, but you want to be entirely sure, contact your state’s attorney general office. Lenders and loan brokers are required by law to register with state agencies before they can do business there, so if the attorney general has no record of the company you’re dealing with, run in the other direction.

Other tips to consider

In addition to taking the above steps, there are some other small things to think about as you learn how to check if a loan company is legitimate. Here are some questions and answers to help:

Do loan companies ask for money up front?

Some lenders charge what’s called an origination fee to process your loan. However, this fee is typically deducted from your loan disbursement. No legitimate lender will ask you to pay them the fee directly before you can get access to your money.

Do loan companies check your bank account?

In some cases, a lender might ask for your bank information to know where to send the loan funds after your application has been approved. However, it’s not normal for a bank to ask for your online banking login information to check your account.

If this happens, it might be a scammer looking to get access to your account to make a withdrawal or transfer to their own account.

How do I spot personal loan frauds?

Some personal lenders will allow you to use personal loan funds to start or fund a business, but there are also plenty of scams to watch out for. In general, you can use the same steps as you would with a business lender to find out if the loan offer is fraudulent.

Are bad credit loans legitimate?

There are several legitimate business lenders who specialize in working with borrowers with bad credit. However, it’s important to take your time when comparing bad credit business lenders to make sure you not only avoid scams but also improve your chances of getting favorable terms on your loan.

The bottom line

If you’re trying to get capital to grow your business, knowing how to check if a loan company is legitimate can save you from losing money and potentially your business. As you consider these tips and learn where to look to compare legitimate lenders, you’ll be able to get the help you need without being worried about getting taken advantage of.

SOURCE: https://www.nav.com/blog/how-to-check-if-a-loan-company-is-legitimate-36756/



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