Don’t Get Scrooged Shopping for An Online Loan This Year
While the holidays are a great time of joy, they can also be a significant time of stress for many working families. Despite the strong economy and wage growth, many Americans may need access to short-term credit to deliver the holiday experience they have in mind, or to deal with an unexpected cost like a medical emergency or fixing the car or the home heating system.
But today, thanks to technology and innovation, reputable online lenders offer Americans with a good, but perhaps not perfect, credit history an excellent option for the loans they need because they are safe, quick and more affordable. The key for consumers is to make absolutely certain they are dealing with a reputable online lender, because online fraudsters work overtime during the holiday season. Consumers must be on alert to distinguish between the good and the bad.
To help consumers and combat fraud, a group of reputable internet lenders called the Online Lenders Alliance (OLA) developed and manages a consumer fraud protection and industry policing program with three main components:
First is the OLA Member Seal, which has become a trusted symbol for consumers looking for affordable credit online. Companies must earn the OLA Seal by demonstrating that they follow superior Code of Conduct and Best Practices that surpass legal standards and include everything from how a loan is advertised to how debt is collected.
Second is OLA’s consumer protection industry policing program, which is an advanced web-crawling system that analyzes hundreds of thousands of websites each year. Under this activity, companies using fraudulent or deceptive terms like “guaranteed,” “no credit check,” “match,” and other prohibited advertising tactics are identified, named, and reported to federal authorities.
Finally, OLA operates a free hotline to any consumer having an issue with an online loan or suspects fraud, helps them to navigate the process, reports any questionable behavior to the authorities and provides greater financial literacy for borrowers. A recent analysis of calls to the OLA hotline found that the number of fraud reports and people looking for loans in general spikes during the holiday season. While these instances are relatively low, we consider any amount to be unacceptable and do our best to call it out when we see it.
Below are a few recent fraud reports we have seen come through our hotline and we want to make consumers aware of, so they do not fall victim to these, or any similar, scams:
- Requiring payment before you are given the loan
- Demands to pay money owed on loan with the threat of legal or law enforcement action
- Offer of instant credit repair, once payment is submitted
- Verification of your personal information (i.e. bank account, social security number) to confirm eligibility for an unsolicited loan.
Finally, here are some additional facts consumers in search of short-term credit should know:
- Affordability: For those with a good but not perfect credit history, online loans can be an attractive and affordable alternative to bouncing a check, overdraft fees, piling up debt on a credit card and paying only the monthly minimum, or worse, bankruptcy.
- Job and/or Income Based Requirement: In order to be approved for most online loans from reputable vendors, an applicant must provide proof of employment or other steady income. In fact, most online borrowers belong to the category of middle- and upper-income and are grappling with a financial shock like a divorce or a medical emergency.
- Proven Product for Americans: The median age of an online installment loan borrower is 43, while the median age of a small dollar single-pay loan is 41. Most borrowers are neither young nor elderly. Homeowners represent 42 percent of online borrowers and a majority have completed some higher education, with many having 4-year degrees.
Access to credit is access to opportunity and security. Most American families have non-prime credit scores, which makes them ineligible for traditional loan options. For those considering taking a loan out online this year, reputable online lenders can be a trustworthy source to provide the ultimate privacy, speed, convenience and flexibility to meet their credit needs.