Why You Should Never Borrow Money From Strangers Online
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UPDATED: Apr 16, 2013
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It’s never been easier to borrow money online.
A simple Google search will lead you to a variety of lenders; some better than others. Even Reddit has a section where borrowers seeking personal loans can hook up with willing lenders.
Websites like PayPal and Google Checkout make it simple to send money to borrowers, and in turn for borrowers to receive money. But just because it is easy doesn’t mean it should be done. In fact, borrowers should never borrow money from strangers they meet online, even when they’re desperate.
It’s A Trap!
Arif A. Mahmood, technology and social media lawyer, told loans.org that borrowing from an unregulated lender exposes borrowers to having their social media profiles used to blackmail them later on.
Mahmood explained that quite simply, many fail to realize that aggressive lenders can create fake profiles to follow people online. Lenders can claim to have private confidential information and threaten to contact friends, family, and co-workers. Some may even impersonate you and post offensive information.
No one wants the hassle of having to pick up their life after a blackmail threat; not to mention the time spent with law enforcement and the legal system.
Worse still, the internet is a global communications system; so there’s no guarantee the loan shark is within reach of US law.
Aside from the heinous threat of blackmail, lenders can simply demand higher and higher fees or interest.
“For example, you may be asked for a small transaction fee upfront, or you could be asked to provide personal or banking information as collateral,” said Mahmood. “The lender may later insist there are additional charges and threaten to post embarrassing information if they are not paid.”
While there are no doubt responsible and even generous individuals online who are eager to lend personal loans at affordable interest rates, they lack one key attribute that licensed lenders have: regulation.
Regulated in Self-Interest
Regulated and licensed lenders have more public assets and reputations to protect than typical random strangers.
Tony Kiene, Managing Director at GlobalX, told loans.org why licensed lenders—even for-profit ones—are far superior to individuals who offer to lend out personal loans online.
“A licensed lender is far more safe to borrow from because they will be held to not only professional standards of conduct but also state laws that regulate everything from what can be used as collateral to the interest rate that may be charged,” said Kiene. “Further, as a for-profit business their reputation in the community is important if they wish to continue conducting business with new customers.
Echoing Mahmood’s sentiments, Kiene cautioned that quite-often individuals who offer loans online may be loan sharks who plan to charge usurious interest rates.
Despite being portrayed as leather-jacketed thugs in misty alleyways handing out bundles of cash at night, it turns out loan sharks do operate online. Desperate borrowers swim to these online loan sharks out of necessity only to find themselves in more trouble than when they started.
A far cry from being loan sharks, licensed online lenders have never been held to higher standards of security and integrity.
“They should look at such things as Better Business Bureau reports, the Rip Off Report on the internet, the consumer affairs division of the Attorney General’s office in their state as well as speak to others who have borrowed from this lender,” said Kiene.
More so, security verification, such as VeriSign, ensures that the personal financial data that borrowers submit to licensed websites is transferred over a secured channel where it is protected from all but the most vicious of hacker attacks.
These reasons alone should give pause to any desperate person looking to borrow a loan from strangers online. While online banking and internet safety has come a long way in recent years, honest people will always be vulnerable to more predatory minds. There are no safety nets in life better than a cautious and alert attitude, and there are no safer bets when it comes to borrowing a loan than a licensed and secured online website.