When disaster strikes, and you’re low on funds, borrowing money may seem like a natural solution. But taking out a loan doesn’t always come naturally to everyone. Some people don’t know how to spot the differences between a legit loan and a scam.

This is a crucial skill if you expect to find a genuine loan that can help you in an unexpected emergency. So, if you aren’t sure what makes a loan company, keep scrolling. Below is a short guide on reading the signs and finding the best loan for your needs.

Look for a License


A license tells you a lender has the legal right to grant funds in your state. The only way they can earn this certification is if they prove they follow state-wide and federal lending laws.

The laws are pretty important when it comes to your loan.

They regulate the rates and terms that a lender can use, which directly impacts the fees you pay.

A lender without a license in your state is one that’s best to be avoided. Without this accreditation, there’s no telling whether their rates and terms are fair.

Make Sure Your Data is Safe


Your financial information is a precious commodity. You should only share it with those lenders you know will safeguard it properly. If they don’t, there’s a chance your data might fall into the wrong hands.

Cybercriminals target websites that don’t have online security because it’s easy to do. They can breach weak defenses and snag banking numbers or social security numbers — two pieces of data they can use to steal money and commit fraud.

Reversing identity theft is possible, but it’s a huge hassle that may take years. It’s in your best interest to avoid it, which is why you should always check your lender intends to protect your data.

Stick with Online Direct Lenders


The Internet has revolutionized the way you look for installment loans. It wasn’t too long ago that your only borrowing options came from whichever bank was closest to your house.

Now, the Internet brings you installment loans from all over in the time it takes you to blink without ever having to leave your home.

With that many options at your fingertips, you may feel overwhelmed. Loan-matching services are ready to jump in to help you wade through your options but think twice before signing up with them.

These services act as brokers, shopping around your personal information to an expansive network of lenders. Your financial data gets around, and you may not always know where to.

While this isn’t a scam itself, it does increase your chances of becoming a victim of fraud. You may not know the lenders in your broker’s network, which means you can’t vet their privacy or online security measures before they get their hands on your data.

Online direct lenders provide a more one-to-one exchange of your data. When it comes to an online lender like MoneyKey, no other companies are involved. These online direct lenders handle everything involved with the lending process, from receiving your application to granting your funds to collecting your repayments.

For more information on how direct lenders work online, check out

Double-Check for the APR


As you start scrolling through direct lenders’ websites, pay close attention to the way they talk about their installment loans.

Remember those laws that protect borrowers? One of them is The Truth in Lending Act (TILA), which regulates the way lenders may advertise their products.

Under TILA, a lender cannot only tell you the monthly payments without referring to the rates and fees that apply to their loans. TILA requires online installment loan companies to disclose the Annual Percentage Rate (APR) upfront, well before you apply or accept a loan.

APR not only includes the interest that may accrue on an installment loan but also all other fees, charges, and costs that may apply over the entire lifespan of the loan.

As a result, APR gives you a more truthful look at your installment loan’s full cost. You can’t determine if you can afford the loan with this information.

Compare the Terms to Your Budget


Next to APR, terms might be one of the most important details of your loan. It lets you know when you’re expected to make a payment. The size and frequency of these payments tell you a lot about a loan and whether it’s something you can afford.

Let’s look at a comparison between payday and installment loans as an example.

Direct payday lenders offer lightning-fast terms that require you to repay everything in one lump sum. This due date usually coincides with your next payday, so you need to be sure your next paycheck is big enough to cover it and your normal responsibilities.

Although this lump-sum payment is important, you should never prioritize your loan payments over your normal bills. Legitimate payday loans direct lenders liken borrowing money to a juggling act where you can afford both.

Unfortunately, the short terms of direct lender payday loans can make this task challenging.

Compare this to installment loans direct lenders, which offer small-dollar loans with longer terms. While your due dates may still coincide with your payday, you’ll pay back what you owe over a series of installments.

Knowing what your terms mean helps you determine if a loan is something your budget can handle.

Don’t worry if you need to cinch this spending plan a little tighter. You can cut out unnecessary spending to free up cash to go towards your repayments.

Just remember, you shouldn’t put the essentials on hold to repay what you owe. That’s a sign you can’t afford a loan, or your lender is offering predatory terms.

Choosing the Right Lender for Your Needs


Borrowing money is a big decision that requires your full attention. But in an emergency, the urgency of your situation can make it difficult to focus. All you want is a quick solution so that you can put this tough time behind you.

Unfortunately, jumping headfirst into a loan can be problematic if you lock into rates and terms you can’t afford.

Nobody wants to overpay for what they need. So the next time you want to borrow money, use this list to help you stay on track.