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How to Know Who to Borrow Money From

January 11, 2019 | By Daniel Dewitt

No one likes to borrow money, but from time to time all of us have to do it. Especially in today’s financial landscape where wages have been stagnating for twenty years, most of us have next to no savings. With healthcare costs ballooning and paychecks staying the same, fast loans are an indispensable financial tool.


But once you’ve made the plunge and decided to take out a loan to borrow the money you need, a whole new world of questions opens up: where do you get it from?
How fast can you get it?
How do you know which lender to trust?
Borrowing money is a broad topic, so today we’re going to zero in and focus on that last question and show you how to discriminate between predatory lenders and those you can trust.


Check These Simple Loan Types First

Before going through hassle of finding a lender you feel comfortable borrowing money from, make sure you’ve already ruled out the paths of least resistance. If you need money immediately, most credit cards have a cash withdrawal option that will let you spend up to a certain amount without interest so long as you pay it off within the month.


It can be awkward to ask, but friends and family are also a safe source to borrow money from. Some may not ask for interest but, even in those cases, it’s important for both you and them and your relationship to set up a clear and unambiguous timeline for repayment of the loan.
Sites like iOWEYOU and BillMonk are perfect for this, though something as simple as a spreadsheet can also get the job done. Just be sure that your both clear about the terms of the loan going in and are committed to seeing it through, otherwise it can have negative ramifications on your relationship.


Know How to Spot Predatory Practices

The first step to finding a trustworthy and dependable lender is to know what to watch out for. Predatory lenders are those lenders that, simply put, try and prey on unsuspecting people looking to borrow money.


Debt.org explains it well: “By definition, predatory lending benefits the lender and ignores or hinders the borrower’s ability to repay the debt. These lending tactics often try to take advantage of a borrower’s lack of understanding about loans, terms, or finances.
Predatory lenders typically target minorities, the poor, the elderly and the less educated. They also prey on people who need immediate cash for emergencies such as paying medical bills, making a home repair or car payment.
These lenders also target borrowers with credit problems or people who recently lost their jobs. This could disqualify them from conventional loans or lines of credit, even though they have substantial equity in their homes.”


Other types of predatory lending practices include lenders who run outright scams to try and access either your bank account or harvest personal information which they can then bundle and sell to others.
When it comes to predatory scam lending the key dynamic to watch out for is if the lender is trying to gain access to your money, bank account, or personal information. A predatory lender will try and siphon money or personal information from you to them without actually loaning you any real money.


Transparency

One of the best markers for whether a lender is trustworthy is how transparent their website and business as a whole is. Is it easy to find how much you can borrow?
How quickly you’ll have to pay it back?
At what interest rate?
These are all questions that are vital to your decision making, and ones that predatory lenders often try to obscure exactly because of that. A reputable lender will offer a clear product with straightforward terms of repayment and interest.


Another marker of transparency is how difficult it is to communicate with the lender.
Do they make themselves scarce when you have a question?
Are the answers unclear?
All these are bad signs that even if they don’t mean the lender is predatory, do mean that they aren’t someone you want to stake your financial livelihood on.


Loan Seem Too Good to Be True? That’s Trouble

While being optimistic is a great life trait, it’s something you should lay aside while searching for a trustworthy lender to borrow money from. The reason for this is actually pretty simple.
There’s been a huge amount of research done on borrowing and loans, and the consensus is that most people will not be able to pay back a loan at faster than 10% of their monthly income.


Loan companies and lenders don’t survive in the long term if their customers can’t pay back their loans.
What this means for you is that if the loan a lender is offering is of too high an amount then it’s not a company that has a sustainable business model, which means that it isn’t one you want to be in business with.


Check Reviews

No, we’re not talking about Yelp.
If you’re ever unsure about whether a lender is trustworthy or not, one way to assuage your fears is to check their rating with the Better Business Bureau. The bureau tracks customer reviews of specific businesses, and more importantly, tracks complaints.


In their about page the Better Business Bureau states about the reviews it accepts:
“BBB always tries to verify that a marketplace interaction occurred between customer and business. As you read BBB reviews, bear in mind that this is not an exact science but a tool to help you decide with whom to do business, where to stay, or where to eat. Read multiple reviews and decide which ones you trust.”


You can also check to see if the lender you’re unsure about is listed as a scam on the Federal Trade Commission’s Scam Alerts, or has been registered for complaint with the Consumer Financial Protection Bureau’s. Both are official government institutions that our tax dollars fund, so you might as well make the most of them.


And finally, you can always simply ask any friends or family if they’ve had any experience with a lender.
Talking to someone who has first-hand experience with the process and company is invaluable because you can question them about the intricacies and specifies that matter to you and may go unmentioned in a review.


Know What Kind of Loan Is Right for You

Another key step to knowing who it’s safe to borrow money from is to understand what kind of loan best fits your current needs so you aren’t taken advantage of by a lender trying to confuse you.
There are a variety of loans out there: personal loans, payday loans, title loans, mortgage loans, etc. Each have their own distinct pros and cons and uses. For example, mortgage and title loans can both net you high cash amounts, but respectively require property or a car to access.


Meanwhile, payday loans are fast loans that can get you the money you need in under an hour. Personal loans are also a good option, but require strong credit to get a decent interest rate on. We’ve written before about the advantages and disadvantages of different types of loans, but it’s worth doing more research online before committing to a lender.

Who to Trust for Auto, Personal, or Payday Loans

While there’s ultimately no way to be a hundred percent sure you can trust a lender, the steps laid out above will get you ninety-nine percent of the way there.
When finding a lender you trust to borrow money from you want to find one that’s established, transparent, has good reviews, and doesn’t participate in any predatory practices.


The most important step to finding a good lender is simply to do research.
Far too often we simply default to the simplest and quickest option in life without putting in the effort to do it right. So if you’re looking for a lender to borrow money from be sure to put in the work and make sure it’s one that you feel confident has your best interests in mind.