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Warning Signs of Personal Loan Scams

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Interest in personal loans is rising this year, industry experts say. 

Unfortunately, potential scams are rising too.

Amid record-breaking unemployment rates and a staggering economy, consumers are seeking personal loans for two primary purposes: to consolidate credit card debt or simply to get by, says Brian Walsh, CFP and senior manager of financial planning at SoFi, a national personal finance and lending company. 

“This is a way to help get them through until they get back to normal,” says Walsh.

Scammers have taken notice. In the first four months of 2020, the Federal Trade Commission (FTC) reported more than 18,000 accounts and more than $13.4 million in losses to COVID-related fraud. Those complaints cover a range of financial scams. But personal loan scams have been a problem since before COVID. Last year, the Insurance Information Institute, a trade group, recorded nearly 44,000 reports about potential personal and business loan scams. 

“Unscrupulous people will try to take advantage of people’s needs,” Walsh says. And in the middle of a pandemic that’s putting the economy through the ringer, those unsavory people are finding ample opportunity. 

If you’ve determined that a personal loan makes sense for you, the next step is to explore red flags and warning signs of personal loan scams. 

Personal Loan Scams Warning Signs 

“There are basically two main reasons you could get scammed: people are either trying to steal your money, or they’re trying to steal—and maybe sell—your personal information,” says Jamie Young, managing editor at Credible.com, an online loan marketplace.

Here are some warning signs to watch out for.

Too Good to Be True

“If it sounds too good to be true, it most likely is,” Walsh says. In fact, all the experts we spoke to echoed this sentiment. They agreed if a lender has a guaranteed approval for a fast loan, raving reviews only on their own website, doesn’t care about bad credit, or offers  no credit check at all, it’s wise to do a ton of research before you agree to anything. 

That might include reaching out to you. “It’s not uncommon for banks to send you offer letters in the mail. But if it’s a bank you’ve never heard of and they’re randomly reaching out to you with a deal seeming a little too good to be true, you should proceed with caution,” says Farnoosh Torabi, NextAdvisor contributing editor and host of “So Money” podcast.

Bad Credit? No Problem

Pre-approvals, guaranteed approvals, or no credit checks seem to be common themes in personal loan scams. If the lender is making guarantees before checking your financial history, be cautious. Guaranteed approvals or no credit checks are possible scams. “A lender needs to do some sort of underwriting to assess and price that loan appropriately. If they’re not doing that, it’s a red flag to me,” Walsh says. 

Upfront Payment

All the experts we talked to said to be wary of advance-fee scams. 

“With some personal loans, you’ll need to pay for an application or the origination fee, but that’s going to come from the loan,” says Walsh. In other words, any fees associated with the loan should be covered by the loan itself. If you have to come up with out-of-pocket money, walk away. 

Pro Tip

Your state’s finance department should maintain a registry of approved lenders. Check it.

These fees are often worded with legitimate terms like “application fee” or “processing fee.” However, these fees are anything but legitimate and often ask you to do things that may seem odd, like purchase a prepaid card, says Anuj Nayar, financial health officer at LendingClub.  

“Legitimate personal loan lenders do charge something upfront. It’s called an origination fee, and that’s normal — but it’s taken out of your loan proceeds,” Young says. On the other hand, she says, “advance-fee loans are not legitimate. You should never be giving anyone your money out of your pocket before you get approved.”

Lack of Company Information

Another big alert of a potential loan scam is a lack of information about the lender. Legitimate financial institutions usually have an address and ample contact information on their site. If your lender has no information about their company other than a URL, do some extra digging before you give them any personal information. 

Pressure Tactics

Finally, if a lender ever applies any pressure, don’t bend to it. “No one’s going to pressure you if they’re a legitimate lender,” says Young. 

“Make sure you aren’t feeling pressure to make a decision today or disclose personal identifiable information like a bank account number, Social Security number, or credit or debit card information,” says Nayar. Reputable institutions will not force your hand or rush the personal loan application process. 

How to Vet Loan Providers

Make Sure the Website is Secure

Check the company’s website URL to see if it has HTTPS. The S stands for secure. HTTP (with no S) is not a secure site to handle personal data collection. You want to make sure the site is secure since you will be giving personal information, says Young. 

Look Them Up

A reputable financial institution should have information about themselves online. “If you can’t find any information on this company or this product, walk away,” Torabi says. She recommends doing a Google search with the institution’s name and the word “scam” to see what comes up.   

Read Reviews

“Do some internet sleuthing,” Young says. And Walsh agrees. “Whenever you’re shopping for a financial product, you should read reviews and shop around as much as possible,” he advises. Scour reviews to make sure other consumers haven’t been mistreated by any lender you’re considering.  You can check out Better Business Bureau and google “reviews for X company,” Young suggests. 

Ignore the Fishy Offers

As our experts emphasized, you may get offers sounding too good to be true. Ignore them. Don’t fall into the trap of big promises of waived credit checks and guarantees for a fee.   

Vet Through Government Tools 

Government resources are free and “there to help consumers not get taken advantage of,” says Walsh. You can vet your potential lender through one of these sites by typing the name of the company into the search bar.  If there are charges against them, one of these sites will report on it. 

Experts recommend:  

Federal Trade Commission’s (FTC)

Consumer Financial Protection Bureau (CFPB)

U.S. Public Interest Research Group (PIRG) 

The American Bankers Association (ABA)

Check Your State’s Registration Resources 

Your state’s finance department should maintain a registry of approved lenders. “With personal loans, it’s about verifying the institution and making sure they’re registered,” Torabi explains. State resources vary; some states issue lender’s licenses, others register them. Look up your state’s system and make sure the lender you’re considering checks out. For example, I searched for “New York state licensed lenders” and reached New York State’s Department of Financial Services. Here you can search for information on licensed lenders in New York. 

Shop and Compare Rates.

Compare rates with a few lenders to make sure you’re getting the loan money you need with the lowest interest rate possible. “With any product you shop for, you shop around. Don’t limit yourself to this one offer,” Torabi says. 

The Bottom Line 

Not only does vetting any financial institution you’re considering protect you from personal loan scams, but it can also help you get the lowest interest rate possible. 

Watch out for lenders asking for money upfront or pressure you, especially if you can’t find much info about their company. When in doubt, it pays to go with a lender you know you can trust. 

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Possible Raises Series B and Moves Fully Remote | State

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SEATLLE, Oct. 20, 2020 /PRNewswire/ — Possible raises $11 million in new equity funding to expand the team and to provide additional products for its customers. Union Square Ventures led the round, with participation from existing investors Canvas Ventures, Unlock Venture Partners, Columbia Pacific Advisors, Union Bay Partners, Tom Williams, and FJ Labs. The company has also secured $80 million in new debt financing from Park Cities Advisors.

Furthermore, the company is now fully remote and recently onboarded software engineers from across the US and the globe. Possible is committed to distributed work and actively recruiting for a number of other remote roles.

Possible provides friendly access to capital and a simple way to build credit for people who otherwise would get a payday loan or get hit with a bank overdraft fee. The company uses real-time financial data, rather than a credit score, to qualify customers and provide funds instantly through its iTunes and Android apps. Unlike payday loans or overdraft fees, Possible loans are paid back in small installments over multiple pay periods to allow customers to catch their breath. By reporting on-time payments to the credit bureaus, Possible enables its customers to build credit history and eventually qualify for cheaper, longer term financial products. On average, customers with low credit scores see their scores increase by 70 points within 4 months.

Tony Huang, Possible’s CEO explains, “So many people who live paycheck to paycheck can’t afford to build credit history. We’re helping them do it for the first time while providing them with a friendlier and more affordable small-dollar loan.”

Since launching in June 2018, Possible’s given out loans to hundreds of thousands of customers, helping meet short-term cash needs while building credit history or establishing credit for the first time. These customers, often with bad credit or no credit history, are underserved by traditional banks. Possible fills that gap and provides financial access to those who need it most while giving them the means to climb their way out.

Gillian Munson, Partner at Union Square Ventures, explains the thesis behind their new investment, “Through tech innovation, data-driven insights, and a focus on the customer, Possible is well on its way to winning the hearts and minds of both consumers and regulators alike, and building a trusted brand that endures.”

A 2019 Experian study shows 34.8% of consumers are subprime and can’t access money when they need it. They pay $106 billion in punitive fees each year to the existing financial system for short-term credit products. These consumers are trapped in predatory debt cycles of payday loans and overdraft fees without the means to rebuild their credit or improve their financial health. While there has been a number of new tech-enabled products in this space, most lead to similar debt cycles and don’t address the harder issue of improving long-term financial health. That’s where Possible comes in.

Since the company is now fully remote, Possible is actively hiring talent across the globe. Tyler, Possible’s CTO, explains, “Being fully distributed allows us to access the talent pool of the entire world. Our success so far is a reflection of the quality of our people, and we believe hiring globally will allow us to find exceptional people to join us in achieving our mission.”

About Possible

Possible is a fintech company based in Seattle, Washington. The company provides a friendlier and easier way for customers to access capital while also building credit history and improving long-term financial health.

About Union Square Ventures

Union Square Ventures is a thesis-driven venture capital firm based in New York City. USV manages over $1 billion in capital across seven funds and focuses investments in portfolio companies with the potential to transform important markets.

About Park Cities Advisors LLC

Park Cities Advisors LLC (“PCA”) is a privately held, SEC-registered alternative credit manager based in Dallas, Texas. PCA is focused on private lending across the specialty finance and FinTech sectors and provides debt capital to companies across a variety of industries through asset-based financing transactions.

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Possible Raises Series B and Moves Fully Remote | State News

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SEATLLE, Oct. 20, 2020 /PRNewswire/ — Possible raises $11 million in new equity funding to expand the team and to provide additional products for its customers. Union Square Ventures led the round, with participation from existing investors Canvas Ventures, Unlock Venture Partners, Columbia Pacific Advisors, Union Bay Partners, Tom Williams, and FJ Labs. The company has also secured $80 million in new debt financing from Park Cities Advisors.

Furthermore, the company is now fully remote and recently onboarded software engineers from across the US and the globe. Possible is committed to distributed work and actively recruiting for a number of other remote roles.

Possible provides friendly access to capital and a simple way to build credit for people who otherwise would get a payday loan or get hit with a bank overdraft fee. The company uses real-time financial data, rather than a credit score, to qualify customers and provide funds instantly through its iTunes and Android apps. Unlike payday loans or overdraft fees, Possible loans are paid back in small installments over multiple pay periods to allow customers to catch their breath. By reporting on-time payments to the credit bureaus, Possible enables its customers to build credit history and eventually qualify for cheaper, longer term financial products. On average, customers with low credit scores see their scores increase by 70 points within 4 months.

Tony Huang, Possible’s CEO explains, “So many people who live paycheck to paycheck can’t afford to build credit history. We’re helping them do it for the first time while providing them with a friendlier and more affordable small-dollar loan.”

Since launching in June 2018, Possible’s given out loans to hundreds of thousands of customers, helping meet short-term cash needs while building credit history or establishing credit for the first time. These customers, often with bad credit or no credit history, are underserved by traditional banks. Possible fills that gap and provides financial access to those who need it most while giving them the means to climb their way out.

Gillian Munson, Partner at Union Square Ventures, explains the thesis behind their new investment, “Through tech innovation, data-driven insights, and a focus on the customer, Possible is well on its way to winning the hearts and minds of both consumers and regulators alike, and building a trusted brand that endures.”

A 2019 Experian study shows 34.8% of consumers are subprime and can’t access money when they need it. They pay $106 billion in punitive fees each year to the existing financial system for short-term credit products. These consumers are trapped in predatory debt cycles of payday loans and overdraft fees without the means to rebuild their credit or improve their financial health. While there has been a number of new tech-enabled products in this space, most lead to similar debt cycles and don’t address the harder issue of improving long-term financial health. That’s where Possible comes in.

Since the company is now fully remote, Possible is actively hiring talent across the globe. Tyler, Possible’s CTO, explains, “Being fully distributed allows us to access the talent pool of the entire world. Our success so far is a reflection of the quality of our people, and we believe hiring globally will allow us to find exceptional people to join us in achieving our mission.”

About Possible

Possible is a fintech company based in Seattle, Washington. The company provides a friendlier and easier way for customers to access capital while also building credit history and improving long-term financial health.

About Union Square Ventures

Union Square Ventures is a thesis-driven venture capital firm based in New York City. USV manages over $1 billion in capital across seven funds and focuses investments in portfolio companies with the potential to transform important markets.

About Park Cities Advisors LLC

Park Cities Advisors LLC (“PCA”) is a privately held, SEC-registered alternative credit manager based in Dallas, Texas. PCA is focused on private lending across the specialty finance and FinTech sectors and provides debt capital to companies across a variety of industries through asset-based financing transactions.



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Business Loans – Make The Right Choice!

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Your business needs funding and there’s no denying that! ‘You need money to make money’ and this is most applicable in the business world! While it is fairly easy to start with an awesome idea, to make a business profitable, you need to invest a good chunk of capital.

Whether to buy equipment or hire the right minds, you need capital! And the best way to go about it is to search for the ‘right’ business loan solution. Finding the ‘right’ one amongst the plethora of available options is a tricky decision.

You’ll be under stress to match the repayment frequency. And thus, your business will suffer. Hence, finalizing the right business financing solution after analyzing your business structure, repayment terms, cash-flow, and urgency is the best practice.

Here’s a detailed breakdown of which business financing solution or small business loan will help your business better!

1. For Real Estate – SBA

SBA loan is one of the most popular loans for small business owners. This is pretty straightforward to understand but involves extensive paperwork. If you need a place to kickstart your business, this is most suited for you.

It is issued by a private lending party or a bank. But the interesting part is that this loan can be guaranteed up to 85% by the federal agency—Small Business Administration (SBA). Hence, lending institutions are free and content to give the loan.

The best things about this loan are the lowest down payments and low-interest rates. If you wish to pay in the very long term, you can do so. An SBA loan involves a lot of flexibility. The condition being you should have the right financial service provider to guide you.

2. For An Equipment Or Any One-Off Loan – Equipment Financing, Term Loan

Do you need a new computer, or a tablet for your employee, or maybe a vehicle for your business’ delivery needs? Equipment financing is best suited for such kinds of needs. You can also get up to 100% financing solutions.

But there is one drawback that you should be aware of. As long as the repayments are done on time, you’ll continue to have access to the equipment. But the moment you fail short of your commitment, the lending institution has completed control over ceasing it.

A business term loan is another solution for this kind of requirement. Term loans are based on the ‘term’ that can be anywhere from 1 to 5 years. So, the repayment has to be made in that time-frame. If you’re looking for business loans in Edgewater, NJ, this will be just about right for you!

3. Need To Balance Cash Flow – Business Line of Credit

Business Line of Credit is the best financing solution that can help you with balancing your cash flow or handling any emergencies.

You get access to a limited amount of funds for a set period of time that you need to pay with interest and as soon as you pay it back, your specific balance sheet is turned back to ‘0’. This indicates that you’re again eligible for using that fund.

You can do it repetitively. There is no drawback to this mechanism. So every time you have an emergency fund need, you can look towards the business line of credit.

The only shortcoming of this system is that the interest rate is high and may require collaterals for approval. However, it is one of the most appealing choices if you need capital and have a bad credit score!

4. Credit Card Based Businesses – Merchant Cash Advance

Do you own a business that involves payments via credit cards? If yes, then the merchant cash advance is the right solution for you.

A business like retail or food chain that makes use of credit card transactions the most, can utilize merchant cash advance to boost its business. The way this financing system works is, the lender will enquire about your daily credit card transactions to the terminal provider and get your exact details. Then, he will compare it with the asked amount. If both are in accordance, you’ll become eligible for the advance.

The repayment term is interesting for this financing solution. Instead of getting a fixed rate, the advance provider will give you the figure in percentage. So every day if you make $1000 and the decided percentage is 5, then $50 will be ‘withheld’.

A merchant cash advance acts more like an investment than a loan!

5. Have No Collateral – Invoice Financing, Equipment Financing

Not all businesses have the luxury of putting collateral on the line and getting access to the desired fund. If you fall into the same category, you do not need to worry! Invoice financing can help you out even in this crunch situation.

Your account receivables serve as collateral in this financing solution and can help you get a loan up to 85% of its worth.

The only downside is the interest rate that is marginally higher than the traditional solutions.

Bonus: For A Small Duration – Short Term Loan

What if you need a loan just for 18 months? You have some debt or need to manage the cash flow, but your requirement is small. Which loan is right for you?

Well, you can opt for a short term loan. This loan gives you instant access to a lump sum of money that should be paid within the next 18 months.

The best part about this loan is that bad credit doesn’t bother the process!

This can also support businesses that need temporary loans to manage or settle a few things. Businesses that do not need some loan that lasts for years!

But just like all other financing solutions, this loan as well comes with a few drawbacks.

The first one being the annual cost will be slightly towards the higher side and the second being that a few businesses may find it hard to cope-up with the weekly payments.

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