With the arrival of online lending, small business owners can go straight to the web for a fast and convenient way to borrow money. Many online lenders promise quick funding times and lenient eligibility requirements. But there are a few trade-offs when you choose an online business loan over a traditional loan, many of which are downright scary.
Here are some basic facts to be aware of before approaching online business lenders.
You’ll likely encounter higher interest rates and hidden fees.
Online business loans tend to charge higher interest rates because there’s more risk involved for the lender. Make sure you read the fine print on the loan or else you might end up paying astronomical fees to a bad lender. If you end up paying a fee, you can be sure they’ll keep draining “one last” fee out of you until you wise up. Your credit union or bank will likely give you that same loan for much less without sneak attacking you with extra costs.
It’s a breeding ground for scammers.
Not all online loans are scams. But more times than not, if it sounds too good to be true, it probably is. The internet is crawling with predatory online lenders waiting to take advantage of your financial situation. Make sure you do proper research before moving forward with any online lender so you do not run into trouble. The information you submit on your loan application can be used to steal your identity.
Many just want your information.
Some online lenders are known to withhold information about their offerings until the business owners surrender data about their business. Be careful when providing information to sites like these as they might not be lenders at all but lead generation sites. These sites will sell your contact information to other hungry lenders who will stop at nothing to get money out of you, even if it means blowing up your phone day and night.
Sure, online lenders are quick and easy, but some things should take time, especially when your personal information is involved. Before you dive headlong into a relationship with a faceless lender, have a conversation with your credit union and compare your options.
Quality is the best business plan. From managing cash flow to planning your future, Louisiana FCU is here to help you get there with fresh ideas and financial services that offer great value and flexibility to succeed.