Since 2016, consumers who have had issues with loans through online marketplace lenders can lodge complaints with the Consumer Financial Protection Bureau (CFPB). These personal loan complaints are then cataloged in an easily accessible database for public perusal.
In 2021, 750,000 people filed personal loan complaints with the CFPB. 5,500 of those were related to payday loans, title loans, or personal loans. Common themes in these personal loan complaints included difficulty receiving loan funds and making payments, as well as unexpected fees.
There are a few things to keep in mind before taking out a personal loan with an online lender. Make sure to do your research on the individual lender, as well as read reviews from previous borrowers. This way, you can avoid any potential issues that may arise.
Online lenders vs. traditional lenders
There are many reasons why people might choose to take out personal loans, including consolidating debt, paying for home renovations, or large expenses. One option for securing a personal loan is to go through an online lender, which typically comes with lower interest rates and fewer fees than traditional bank loans.
Online lenders are often seen as being less reliable and trustworthy than traditional banks. This is one of the reasons why the Consumer Financial Protection Bureau began accepting customer complaints about online lenders in a public database. The hope is that this will help to keep them honest about their practices.
Personal loan complaints in 2021
In 2021, the CFPB received 5,500 personal loan complaints from borrowers. The most common complaint was that they were charged fees or interest that they did not expect to pay. Another major complaint was that borrowers had problems making payments.
Unexpected fees or interest rates
Customers who took out personal loans and were charged unexpected interest and fees generally felt misled by the lender. They felt that the interest rates were higher than what was initially quoted and that fees were not openly disclosed.
Borrowers who took out personal loans often found themselves surprised by the amount of interest and fees they were required to pay. In some cases, the interest rate was much higher than what they were expecting. This can create a difficult financial situation for the borrower.
A personal line of credit can be a great way to finance big purchases or consolidate debt. But, as one borrower found out the hard way, it’s important to be aware of the interest rates attached to these loans.
This customer reported having paid off $5800 of a 4-digit loan (XXXX), but still owed the lender XXXX. Despite attempting to negotiate lower monthly payments with the lender, this borrower could not do so and experienced damage to their credit score.
Unexpected interest and fees can be a huge blindside for customers. One borrower who took out an installment loan for $1200 was charged $2200 in fees on top of the original payment. When confronted about the unexpected high fees, the lender said that the details had been provided in the information packet that was digitally signed.
Problems when making payments
Customers who had trouble making personal loan payments generally said they were caught off guard by how often they had to pay, that lenders didn’t tell them when there was a problem processing their payment, and that lenders were inflexible about due dates and late fees.
Frequency of payments
A borrower took out a personal line of credit for $10,000 and made a $7,000 purchase shortly after. They assumed they would receive their first bill 30 days after making their payment, but were surprised when they got their first bill for $1,100 only ten days later.
The borrower contacted the lender and was told that all customers have the same billing cycle, regardless of the loan start date. The representative from the lender said this was in the loan terms and conditions, but the borrower says they were never given this information.
Payment processing problems
Loans can be a lifesaver when you need money for an emergency, but some borrowers have complained about being charged late fees when their payments don’t go through.
The borrower had taken out a personal line of credit and failed to make a payment on time. They claim that the lender did not notify them of the rejected payment, and charged a late fee. The borrower argues that this has damaged their credit and is making it difficult to apply for a mortgage.
Payment negotiations
Borrowers who have difficulty making payments often complain that lenders are unwilling to negotiate with them. These personal loan complaints are usually general, with borrowers requesting extended payment due dates or expressing difficulties in paying off their loans. More often than not, these requests are met with little to no help from lenders.
Lenders are not required to negotiate with you or offer extensions on late payments, but some may do so. Some lenders have strict policies and fees in place for late payments.
Difficulty getting a loan
Although 13 percent of personal loan complaints in 2021 were related to difficulty obtaining a loan, many consumers with great credit scores and histories of on-time debt payments were still approved for loans. However, some prospective borrowers expressed frustration at being denied a loan despite their good credit record.
Tips to avoid issues with your personal loan
There are many benefits to taking out a personal loan, including the extra cash it can provide and the manageable payment plan. However, it is important to be aware of the fees and interest rates associated with personal loans before signing on the dotted line. Carefully consider all aspects of the loan agreement to avoid any nasty surprises down the road.
Read the fine print
When you’re shopping for a loan, it’s important to understand all the fees and costs associated with the loan. Unfortunately, many lenders are not very transparent about this information, often hiding it in the fine print or at the bottom of their website. This makes it hard to compare shops and make sure you’re getting the best deal possible. So be sure to ask lots of questions and do your research!
Be sure to have all the pertinent information before choosing a particular lender. Also, read over the terms and conditions and other paperwork the lender sends you thoroughly before taking out the loan.
Know what you will pay in interest
There were a lot of personal loan complaints last year from people who took out loans and ended up paying more interest than they expected. It’s important to remember that you might not always qualify for the lowest interest rates offered by the lender. An estimate given to you by an agent before the lender checks your credit and gets a full picture of your financial situation may not be accurate.
When considering taking out a loan, be sure to estimate your potential interest rate and make sure you can comfortably afford the payments. For those with less-than-perfect credit, there are still options available; research lenders that offer bad credit loans with reasonable rates.
Shop around and compare lenders
There are a lot of things to consider when shopping for a loan, and it’s important to compare rates and terms from multiple lenders before making a decision. Depending on your financial situation and how you plan to use the loan, some lenders may be a better fit than others. It’s important to shop around and compare offers from different lenders before making a final choice.
Watch out for predatory lending
When considering taking out a loan, it is important to compare rates and terms from multiple lenders. This will ensure you are getting the best deal possible and help you make the most informed decision for your financial situation. Depending on how you plan to use the loan and your overall financial situation, some lenders may be a better fit than others. It is always important to shop around and compare offers from different lenders before making a final choice.
Be wary of any offers that appear to be too good to be true, and of lenders who try to pressure you into making a decision. Be especially cautious of any phone calls or promotional emails you receive from lenders.
To find out if a lender is legitimate, look up customer reviews, BBB accreditations, and reviews.
One should attempt to stay away from payday loans whenever possible, as they usually have astronomically high-interest rates and tend to cause the borrower to fall into a never-ending cycle of debt. However, sometimes people find themselves in situations where taking out a payday loan is their only option. In these cases, try to explore other methods of borrowing funds first.
How to file a complaint about your personal loan
You can file a complaint about your personal loan by visiting the Consumer Financial Protection Bureau website.
At least 10,000 personal loan complaints are filed with the agency every week. Make sure you state your problem or concern clearly and concisely. You can only submit a complaint once, so it’s important to include all the relevant information that the company you’re complaining about will need to respond to. This includes important dates, amounts, and any communications you may have had with the company.
Making a complaint through the CFPB website allows you to include up to 50 pages of supporting documents. This makes it easier for your case to be thoroughly reviewed and investigated.
The bottom line
There is a growing trend of personal loan borrowers struggling to pay off their loans, due either to a lack of preparedness or insufficient transparency from lenders. In 2021, personal loan complaints received by the CFPB reflect this trend and reveal borrowers’ need for greater clarity from lenders regarding fees, interest, and payments.
Borrowers should be aware of predatory lending practices and make sure they understand all aspects of their loan agreement to avoid any problems.
