How to Find a Legitimate Online Loan

Published on May 22, 2020 by Daniel Azzoli

people crowded around open laptop on desk looking at a legitimate online loan

As more financial institutions go digital, CreditFresh shares some tips to help you spot legitimate online loans.

Choosing to apply for a loan is a big decision. And with every big decision comes great responsibility. It’s up to you to vet a financial institution to make sure they provide safe online loans without hidden fees. Otherwise, you risk jumping into terms you can’t meet — or worse, falling for a scam!  

So how can you tell if a financial institution offers legit online loans? First, let’s define what they are. Then we’ll share some tips to help you find some legit options.

What Are Legitimate Online Loans?

Legitimate online loans are loans which are offered by financial institutions who comply with any applicable state and federal laws. This also includes small dollar, short term loans or line of credit loans.

What Are Federal Lending Laws?

Federally, there are a few laws that you should be familiar with before applying for a loan, such as:

  • The Equal Credit Opportunity Act (ECOA)
  • The Fair Credit Reporting Act (FCRA)
  • The Fair Debt Collection Practices Act (FDCPA)
  • The Truth in Lending Act (TILA)

These are in place to protect your rights as a borrower while ensuring that financial institutions provide fair, non-discriminatory access to products and services.[1]

What Are State Lending Laws?

As for state-level legislation, these laws tend to vary from state to state.

In general terms, many of these state laws are in place to prevent loan terms which are unfair or abusive.

State laws (as well as federal laws), govern various aspects of online loans, including:

  • Consumer privacy and security
  • Minimum and maximum loan or line of credit amounts
  • Loan stacking or refinancing
  • Interest rates and/or fees
  • Repayment terms
  • Transparency of terms and conditions

How to Find Legitimate Online Loans

How can you tell whether a financial institution complies with the law? Here are some tips to help you identify legitimate online loans.

1. Online Reputation

There are several measures you can take to ensure that a financial institution offers legit online loans, but you’ll need to do your research.

businesswoman in black sitting in front of laptop looking at a legitimate online loan.

Go online to see what the company’s customers have to say about their products and services. Does it match up with the picture you have of a legitimate financial institution?

Now, there is no guarantee one review you read online will prove true for your own experience with an online line of credit or loan from the same financial institution. But once the reviews start adding up, you can average out the best and the worst reviews to find a middle ground.

At one time, you had to rely on word of mouth to find out the reputation of a financial institution. Now all you have to do is go online. With an internet connection, you can click through potentially years’ worth of reviews left by previous or existing customers.

Not sure where to find trusted reviews? These websites below will help get you started.

  • Financer.com
  • Google Reviews
  • Trustpilot

2. Borrowing Limits

One important policy is the “ability-to-repay” rule. It’s a good-faith evaluation some financial institutions make to ensure you’re able to pay back your online line of credit or loan.

They generally do it by collecting information about your income and pay frequency. This info lets them see if the addition of your loan is something you can afford.

This, along with your credit score and other variables may help a financial institution decide if you qualify for a loan or line of credit. If you do, it also helps set your individual borrowing limits in some cases.

Depending on your financial situation, you may qualify for less than you need from an online line of credit or loan. These limits tend to be strict, but there may be a way around them if you can apply for a cosigner loan.

A cosigner loan is a personal loan that you apply for with someone else. This friend or family member is responsible in case you can’t pay back your loan and agrees to pay it in your place.

If your cosigner has a long history of making payments on time, they may boost your creditworthiness and in some cases, unlock larger borrowing amounts at lower fees.

If you ever need to, ask your financial institution about their release policies. Wondering what is a cosigner release? If your financial institution allows it, it means you may have your cosigner removed once you make a certain number of consecutive payments on time.[2]

3. Loan Purpose

As a rule, a financial institution won’t force you to use your online loans for a specific purpose. But that being said, not all online loans are made for the same situations.

That all online loans are the same is a pervasive misconception, and it’s just one of 4 myths about online loans we made sure to debunk last year.

In reality, there is a wide variety of line of credit and loan options. Certain purchases or emergencies call for different products.

An online line of credit, for example, may be an option if your car breaks down unexpectedly. It can bridge the gap left by your savings, so you can get back on the road again.

An online line of credit, on the other hand, is not the best fit if you want to upgrade your car with a new spoiler and decal. A short term line of credit is meant for unexpected emergency expenses.

If you’re ever not sure about the purpose of a loan or line of credit, financial institutions which offer legit online loans make it clear what their products and/or services are designed for.

If they’re for emergencies, stay clear of any financial institution recommending you use short term loans or line of credit options to help finance an unnecessary shopping trip or achieve a long-term financial goal.

4. Transparency

Rates, terms, and conditions — these make up the nuts and bolts of your online loan. Between these three things, you’ll know how much you pay, when, and what happens if you don’t.

businesswoman smiling at tablet looking at a legitimate online loan.

Seeing how important these details are, they must be easy to understand. They should be shared in simple language at every step — from your initial visit to their website to the final pages of your online line of credit or loan agreement.

If you notice any hidden fees pop up that you may not be aware of, consider it a warning sign.

Never sign an online line of credit or loan agreement if you aren’t sure about how interest and/or fees are charged.

Your credit score may have an impact over the rates you receive from certain financial institutions. In fact, your credit score can have an influence over other aspects of your life. To see what we mean, check this out to find out how your credit score impacts your choices beyond your finances.

More to the point, a line of credit for people with bad credit may have higher interest rates than options available to people with good credit. Even legit online loans may still come with high fees and finance charges, so read them carefully.

It’s a good idea to get into the habit of checking your score before you apply. This habit comes with two benefits:

  1. Understanding. It may give you a better idea of what kinds of rates you might expect with some financial institutions. You may also avoid spending extra time applying for something you know you may not qualify for.
  2. Prevention. It also gives you a chance to catch any errors or fraud that may be dragging down your score unfairly — and impacting your rates or the amount you qualify for. Here are some tips to help protect your credit score from identity theft. In case your check reveals that you’re a victim of this, visit the government’s identity theft command center to understand the steps you should take next.[3]

What if your score is lower than you expect? When it comes to legit online loans no credit check options may be available, but they likely come with higher interest rates or require collateral.

5. Security 

Going online to look for a loan or line of credit may make your search more convenient. The option to apply online is generally available 24/7 from a financial institution’s website — meaning you don’t have to make the trek to a storefront during business hours. 

There’s one caveat: you’ll have to share your personal financial data over the Internet.

Your personal information should be highly guarded; in the wrong hands, it may be used to open fraudulent accounts and commit identity theft. 

Financial institutions which offer legit online loans will protect your personal information with robust privacy and security measures that safeguard your data. They follow federal and state laws that regulate the way they collect, store, use, and share your data.  

man with short hair wearing green jacket outdoors.

Legitimate Online Loans Are Out There — You Just Have to Find Them! 

In an emergency, looking for affordable and safe online loans is your priority.

The government does its best to help you by regulating financial institutions in the country.  

But that being said, financial institutions that follow the law aren’t automatically the right choice for you. Even with these laws in place, a financial institution may offer rates, terms, and conditions that don’t work within your budget. 

Once you find a source of legit online loans, find out if they’re something you can afford, too.  

To find out more about what we do, get in contact with us anytime. Someone from our Customer Service team will be ready to answer your questions.  

Disclaimer: This article provides general information only and does not constitute financial, legal or other professional advice. For full details, see CreditFresh’s Terms of Use.


[1] https://www.advantageccs.org/blog/consumer-credit-laws-and-what-you-need-to-know-about-them

[2] https://www.thebalance.com/how-to-remove-your-name-from-a-cosigned-loan-960968

[3] https://www.usa.gov/identity-theft