Almost every individual in the country will use banking services, at one point or another. As more stores start offering discounts for electronic payment, a growing number of individuals will be motivated to get debit and credit cards, take out loans, start savings accounts, and get payday loans to make paying for products and services easier. Keep in mind that these are all services that are regularly offered by banks, and most individuals do not consider the possibility of looking at what other lenders have to offer. This is mostly because banks are usually well-established lenders that potential lenders know for certain that they can trust. However, it is possible to get a wide variety of loans and lines of credit from other private lenders. The question here is whether or not it is safe or legal to borrow money from these companies or services.
The Legality of Borrowing Money from Private Lenders
Whether or not borrowing money from a company or through an online service is legal depends on the lender. This also means that, for the most part, the borrower cannot be held accountable if the gets a loan from an unauthorised lender. This having been said, what does it mean for a lender to be authorized? Companies that offer financial services, both online and offline, require authorisation from the government to do so. Depending on the type of financial services that the lender offers, there may be different conditions for getting the authorization. However, the authorisation will always be visible on the lender’s website, and if it is not, searching online will clarify the matter.
This having been said, getting any type of loan that implies signing a written agreement between the two parties (the lender and the borrower) will be legal, provided that the lender is authorised to operate. However, it is important to keep in mind that this does not mean that the lender has the same internal rules that banks do. Each lender will be free to set his own terms and conditions, as well as eligibility standards that borrowers must measure up to. In other words, special care is required when borrowing money from private lenders.
Is It Safe to Borrow Money from Lenders Other than Banks?
While borrowing money from private lenders is legally safe, the same cannot be always said about the financial aspect of the transaction. Traditionally, banks are closely watched by both the public as well as the media, which means that they are forced to offer a large degree of transparency when it comes to the services that they offer. Unfortunately, private lenders do not always have the client’s best interests in mind. Some companies and services specifically design their terms and conditions to keep the borrower indebted for a very long time. Generally speaking, you will always be able to figure out when you should not trust a lender, just by looking for information online.
Otherwise, simply look at the fine print and keep your eyes open for any hidden charges that are not specified when borrowing money. In these situations, it is better to ask as many questions as you have and to research the lender thoroughly. If everything checks out and the platform or company has great reviews, then you will not have any issues. In the case of physical companies, you will need to do a bit of manual research, however, if you are curious about an online lending service, then websites like TrustPilot and other review platforms should provide precious insight.
Lastly, remember that you can always go to the authorities is you feel that the lender is breaking the law. The procedure is the same as with any bank.