Source – Unsplash – Laura College
If you’re in a position where you want or need to borrow some money from a company, it is important that you take that loan from a reputable lender. A loan shark could leave you in a bad financial position, as they do not follow legal guidelines for responsible lending. It isn’t always easy to tell who is legitimate and who isn’t though, so let us help you. Here are five tips for telling the difference between a reputable lender and a loan shark:
1. Have A Look Around
The first step is to broaden your search. It may sound simple but sometimes if you have only seen one type of cash loans advertisement, then you don’t have a comparison to make. Look online, in your emails, in magazines and newspapers and get a feel for the different loan advertisements and how they look. You’ll soon notice a difference between who is being targeted by the ads, and the kind of services being promoted. The small print is always a good place to look for fine’ details that may not be apparent in the main offer.
There should be no shady hidden costs or charges. There should be a clear contract and the company should be able and willing to answer any questions that you have about your contract or the service. Payment method options, interest rates, repayment periods and contract details should all be openly discussed. The biggest red flag that a company is a loan shark is a lender who can’t or doesn’t want to answer your questions about the loan.
3. The Amount You Can Borrow Is Reflected By Your Salary
All reputable lenders abide by the Singapore law where how much you can borrow is restricted by how much you are able to pay back. If a company offers you money without even checking your income, or that doesn’t seem right compared to your salary, they are likely to be a loan shark.
4. A Contract
A major red flag that a company is a loan shark is that they do not present you with a contract to sign. You should be given a contract created by a lawyer that includes details about the interest rate, when you need to pay the loan back, what happens if you are late with repayments, and the options you have to repay the loan. A signed receipt, verbal agreement, email, text or other casual communication is not an official legally binding contract.
5. Reasonable Interest Rates
You might pay more interest on a short-term loan than on something more long-term like a mortgage. However, if the company you are interested in has the average amount of 400% interest on payday loans in America that is absolutely a red flag that the company is a loan shark, especially if you have a very short period of time to pay it off. The company may well be operating within current legal limits, but legality doesn’t necessarily mean ethics.
Sometimes loans are necessary to pay for an unexpected emergency, or for a special occasion. You might require a loan, but it is important that you don’t panic and choose a company that takes advantage of you just because of your need.
There are reputable lenders around offering transparency, legal compliance and responsible interest rates. Follow our tips above, ask questions and shop around to make sure it is those types of lenders and only those types of lenders that you use for borrowing.