Many people make the mistake of assuming they are applying to an unsecured loan company when in actual fact it is a broker they have actually applied to.
A broker will contact several loan companies on your behalf to try and get you the loan you want. If they are successful they are paid a bounty from the loan company for introducing you to them.
Often, using a reputable broker can make a lot of sense – especially if you have a less than perfect credit history. It can save you a lot of time and they will know specialist lenders that are willing to work with them to get you the loan you want. However, a reputable broker will not ask you to pay them a fee, or if they do, it will only be due once they have found you a loan.
The Up Front Loan Finders Fee Scam
There are several brokers operating who promise to find anyone an unsecured loan – no matter how poor their credit rating. This is to get people to apply by building up their hopes that they have found an unsecured loan company happy to do business regardless of their poor credit history.
Once you apply though you are told the application is successful and they just need you to pay their admin fee to get your loan.
One such company is YesLoans. They don’t make it obvious to potential customers who visit their website that they are a broker. Visitors are greeted with an application form on the home page that suggests you are applying for a loan from them. The header states “Loan Application Form…. We Like To Say Yes”
Visitors to their website who fill out the form will be telephoned shortly after and told a loan has been found for them and all that is required to secure it is for them to give their bank account details so they can pay the loan into the account and collect their £69.50 admin fee.
Quite often of course there is no loan waiting or if there is, customers often find the terms are not acceptable – very high APR, not the full amount requested, not the interest rate quoted etc.
When there is no loan or it isn’t the loan required you are then faced with the problem of trying to get your admin fee back. Just do a search for ‘yes loans complaints’ and you will find literally thousands of people complaining about them on the various consumer web sites.
You can read our full YesLoans review by clicking here.
The Unsecured Loan With a Guarantor
Another method used by a few unsecured loan companies to get your custom is to ask you to provide someone willing to be a guarantor. One such company you may have heard of is FLM Loans. They offer unsecured loans between £500 and £5000 with an APR of just under 50% and they don’t mind if you have a poor credit rating. All you have to do is to find a friend or family member who will guarantee the loan for you.
A guarantor loans company is very tempting for people with poor credit who have been turned down elsewhere. The problem comes though if you later have difficulty repaying the loan because as soon as you miss a payment the company will deduct the money from your guarantors bank account, often without notice.
Think long and hard before using any unsecured loan company who ask you to provide a guarantor. You need to be sure that should you have to default you are not going to lose a lifelong friend or leave an aging parent with your debt to settle.
Which Unsecured Loan Company?
An unsecured loan provider will decide whether to lend to a customer by checking their credit history. Someone with a good rating is not going to have a problem getting the funding they require and so the best place to start is with your bank where these type of loans are known as personal loans.
Having a less than perfect credit rating does not mean you can’t get an unsecured loan company to do business with you though. Again your bank is a good place to start because although they may not be able to offer you a personal loan themselves, they will certainly be able to talk you through your options and will often recommend an unsecured loan company that they have worked with previously.
If your bank is not an option then follow these simple rules as you browse the various online lenders:
- Read the FAQ page
- Read the terms and conditions…..carefully
- Write down the APR so you can compare it with other lenders
- If it is a broker, check if there are any fees. If there are, when are they due and how much?
- Make a list of a dozen or so potential lenders.
- Narrow your list down to 3 by searching for each company name with the word ‘complaints’ – eg “Acme unsecured loans complaints”
- DO NOT just apply with every unsecured loan company you come across online.
It is important that you are aware that once you submit the online application form the lenders are going to be telephoning you and often they will resort to hard sell tactics. Yes Loans have had complaints about some of their sales reps using overly aggressive methods to bully customers into supplying their bank details and you can be sure they aren’t the only company using such techniques.
This is why it is important to keep your loan applications down to the absolute minimum and why you should always read the small print before submitting any online application.
You should also know that each time a credit check is run it shows up on your credit history and too many credit checks can have an adverse effect on your rating. For example it is not uncommon for an unsecured loan company to automatically refuse a loan to anyone who’s credit file has been searched within the last 30 days because it is a sure sign the applicant has applied elsewhere and been turned down.
You may also be interested in...
M&S Money Drop Personal Loan Rate To 6%: M&S Money have cut their unsecured loan rate to 6% and anyone looking for a personal loan in 2012 looks [...]
Personal Loan Rates War Hots Up For Christmas: Personal loan rates are at a 4 year low as lenders compete for your custom in the run up to [...]
Unsecured Loans Hit 7 Month High: Unsecured loan lending went up in September by £629 Million on August figures but are still down on previous years.
Yes Loans To Have Credit License Revoked?: It looks like the OFT have finally had enough of Yes Loans and an adjudicator currently reviewing their credit license [...]
Green Deal Scheme To Provide Unsecured Home Improvement Loans: The Green Deal scheme provides unsecured loans for homeowners wishing to have any kind of energy saving improvements carried out [...]
Borrow From Zopa And Stick 2 Fingers Up To The Banks: Peer to peer loans from Zopa are a great way to get an unsecured loan without having to add to [...]
Best Loan Rates On Offer Thanks To Price War: Looking for an unsecured loan of £7,000 or more? Thanks to the current price war, interest rates are as low [...]
Guarantor Loans – Unsecured Loans For Bad Credit: Guarantor loans are a way for someone with a bad credit rating to get an unsecured loan but should be [...]
Yes Loans Review: Find out why we say No to Yes Loans plus learn how to get your refund by reading our Yes [...]