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7 Signs an Online Loan Company is Legitimate

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Make sure you do your research to see if a lender is legitimate
BestMoney Staff
Bestmoney Staff
May. 26, 20224 min read
There are plenty of ways to borrow money. A popular choice is to go with an online personal loan provider. If you do not like the terms of a traditional lender, like a large bank, or you don’t have the credit score required, there is likely a non-traditional online lender that will approve your loan application.

But borrowing from an online lender, it is important to make sure they are reputable. How can you check if a loan company is legitimate?

Whether you are looking for a payday loan, student loan, or business loan, you need to know that you are working with a legitimate loan company. While understanding how a personal loan works is the first step, this article will review what you need to find a legitimate loan provider.

1. It Has a Physical Location

This is the first sign of legitimacy that you should look for when researching loan providers. Most fraudulent companies do not post an address so it makes it difficult to contact them in the event a borrower wants to pursue legal action. If you are borrowing from an online lender you obviously do not need to walk into a physical office or building, but the lending company should still have a corporate address listed on their website. If it does post its address, that a step in the right direction, but you should still Google it to make sure it is an actual address and not a home or abandoned building. Another suggestion is to phone or email the lender. The person on the other end should sound professional and provide a level of customer support you would expect from a lender you can trust. Our review of SoFi, for example, contains contact information that you can also find on its website.

See What Sofi Can Do for You >>

2. It Performs Credit Checks

If you’ve been denied a loan due to a poor credit history, it can be tempting to borrow from a lender that doesn’t perform credit checks. In, fact, this is a red flag. This company may only be interested in obtaining your personal information. Legitimate lenders will require a credit check since this is how a lender can review your financial history to determine how high risk of a borrower you would be. LendingTree, for example, performs a credit score check and accepts credit scores from fair to excellent.

See if LendingTree Accepts Your Credit Score >>

3. It Doesn't Charge Upfront Fees

Be wary of a lender that requires an upfront application fee to apply for a loan. Similar to telephone or email scams that request payment before a service, if the lender asks for money before you receive your loan, walk away. Never send money to a loan company just to secure a loan – even if the lender uses words like “processing” or “insurance.” Legitimate lenders may take an origination fee, but that typically comes off the loan amount, and is not an upfront payment.

A lender should never ask you to wire them money to secure a loan. Scammers prefer to use wire transfers as a way to send and receive money because it is very difficult to trace the transaction.

4. It Has Clear Terms and Conditions

Before you apply for any loan, make sure that the terms of the loan are transparent and you understand them. What is the APR? What is the payback period? What is the maximum you can borrow? A legitimate lender can provide clarity on its loan terms and tell you how much the loan will cost at the end of its life. If the lender in question can’t do that, it is may be a scam.

5. It Has Customer Reviews

When you are in a financial crisis you may need access to money, quickly. But take some time to research potential lenders to find out as many credible details as you can about the lender to avoid becoming a scam victim. A quick Google search should bring up multiple reviews and ratings, both positive and negative. If you can’t find anything at all, walk away.

You can also check with the Better Business Bureau (BBB), which will indicate if the lender is registered in your state and allow you to read resolved and unresolved complaints that it may have in its history.

While you are searching online reviews, take a moment to check out the lender’s website. Two quick things to look for to know if they’re legitimate are to search for a padlock icon on their website and look for HTTPS in the URL. Both indicate that your information will remain secure and protected.

6. It is Registered in Your State

The United States Attorney General’s Office mandates that all lenders are registered in every state they do business in. This registration weeds out the scams and confirms the lender is legitimate. Registered lenders are monitored by the Attorney General, so you can rest assured that these lenders are not making fraudulent promises or have malicious lending practices. Registration information is usually found on a lender’s website, but you can also contact the Attorney General or Department of Finance to confirm.

7. It Doesn’t Pressure You

A lender should never pressure you into signing a loan agreement. You should never hear phrases such as “a limited time offer,” “offer expires tomorrow so act fast,” or “money back.”If it seems too good to be true, it probably is. Lenders use these tactics to get potential borrowers to divulge their personal information and sign loan agreements before they can detect they are working with an illegitimate lender. You do not want to work with a lender who would rather sell you something than help you find the best rates for your current financial needs.

A legitimate lender likely won’t offer special promotions – the rates should be steady and only fluctuate with the market. What rate you qualify for will depend on a number of factors, but your credit score typically dictates how good of a rate you will receive—not a marketing promotion.


Research can help when searching for a personal loan lender. Before you begin the application process, the more credible details you have on the lender, the safer you and your money will be. Start your research here with honest, detailed reviews of today’s top online lenders. The lender should be helpful and be able to tell you the terms of their loan, without pressuring you into any agreement. It should also have a corporate address and a phone number or email address where you can reach a professional company representative. When you’re ready to apply for a personal loan, read this ultimate guide to personal loans to help you understand the different types of loans and their details.

If you take anything away from this article, remember that a lender should never, under any circumstance ask you for money upfront just to start the application process. If you have done your research and are still uneasy, contact your state’s Attorney General office to confirm the legitimacy of the lender.

BestMoney Staff
Written byBestmoney Staff

Our editorial staff consists of writers who are knowledgeable about financial services. We specialize in simplifying the process of choosing the right provider for your needs.

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