By Mike Brown, LendEDU

Folks often need extra money around the holiday season. Financing gift-giving and travel using credit cards can exact a heavy toll in interest expenses, prompting many to consider alternatives like personal loans.

For many consumers, personals loans are frequently less expensive than credit cards. Over the last few years, the online personal loan market has become increasingly popular. Companies like LendingPoint have worked to create a simple online process with loans designed to help a number of underserved Americans.

During the holidays, consumers need to be especially aware of number of financial scams. Read on to learn some of the warning signs that should you should think about if you are looking for a personal loan this holiday season.

Requests for loan collateral or upfront fees: Online personal loans are typically unsecured and originated on the basis of creditworthiness. According to research compiled by LendEDU, many personal loan companies charge origination fees. However, your radar should go off if you receive a request to pay upfront money to the lender as a “deposit” or “collateral”. Avoiding giving out your debit or credit card information during an application process. Remember, origination fees should come out of loan proceeds or built into the regular monthly payments, not as upfront payments.

No credit check loans: The unsecured nature of personal loans means that legitimate lenders assume the risk that you won’t repay. Lenders use underwriting to mitigate that risk and to assign an interest rate and other loan terms. Be skeptical of any lender claiming to provide funding without a credit check. A legitimate personal loan provider will perform an inquiry on your credit report.

Unsolicited email offers: You’d think we know better by now, yet every holiday season, scammers send out emails offering people unrealistic and fake offers for personal loans. Inevitably, they will ask to collect an upfront fee. Even worse, malevolent hackers might include a link that, once clicked, does damage to your computer, and even injects a ransom scheme that encrypts your files. Phishing emails might mimic well-known lenders, so avoid clicking a link from unsolicited email. You can visit the lender’s website or call it to verify that the offer is legitimate.

How to Report a Personal Loan Scam

If you are victimized by a personal loan scam, first call your local police to file a report. It won’t help you recover your money, but it might help the authorities track down the crook and warn others about the scam. In any event, you should lodge a complaint with the Federal Trade Commission’s Internet Crime Complaint Center. You also need to notify the three major credit agencies (Equifax, TransUnion and Experian) that your personal data might have been compromised.

Use a Legitimate Personal Loan Company

Here are a few things to look for when shopping online for a personal loan:

• Physical address: Almost all legitimate online lenders have physical addresses. You should verify the address given is real and belongs to the company.
• Accreditation: A Better Business Bureau accreditation is not foolproof, but it’s certainly helpful. It’s also a good place to check out complaints against a company. LendingPoint is currently rated A+ by the BBB. Alternatively, there are a number of online review website dedicated to financial products. By searching for a review online, you should be able to quickly confirm the reputation and existence of a personal loan company. See example.
• Registration: Verify the lender is registered in your state, and check the verifying agency for complaints against the lender.
• Reasonable procedures: A legitimate lender will have you fill out an application form and will check your credit history. You won’t be asked for upfront money and you should be able to set up automatic online ACH payments from your checking account. Remember, avoid no-credit-check lenders.

Personal loans can be a great alternative to credit cards. You may be able to obtain a personal loan that’s less expensive than a credit card. Additionally, you might be able to borrow more from a reputable lender like LendingPoint, than you would be able to borrow from a credit card. For reference, LendingPoint provides funding for personal loans up to $25,000.

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This article was written by and represents the views and research of Mike Brown,  an active personal finance journalist and research enthusiast, and not necessarily those of LendingPoint. You can follow Mike on Twitter @MikeBrownEDU