If you’re starting the process of looking for a loan, your to-do list can feel overwhelming. There are so many things to look for and with so many options on the market, how can you ever decide? Add to that the fact that there are so many sketchy lenders that offer personal loans, and it can seem impossible to get all of it done. While you’re sorting out the rest of it, you can at least stop worrying about the lending company – here are the 4 things to look for in a lender.

1.  Look for reviews on third-party websites

What do you do before buying something off Amazon, or booking an Airbnb? You read reviews and decide, based on the general consensus, what the issues are, what the advantages are, and whether it’s a good option for you or not.

That’s exactly how you should approach the problem of finding a lending company, as well. Because if you’re putting that much effort into purchasing a camera, surely you want the same vetting process for the people who will lend you money and hold you accountable.

However, the thing to remember here is that the reviews on the lender’s website mean nothing. They are null, as they are most likely written in-house to make them look good, which is why they are not trust-worthy. Instead, look at what people’s opinions are on other websites – were they professional? Do they come up with made-up charges? Does the process go smoothly? Allow other people’s experiences to guide you.

2.  Check that they are registered with the Financial Conduct Authority (FCA)

Did you know that companies who want to lend money have to be registered to do so? That’s right – not just anyone can operate willy-nilly and play with people’s debt like that. However, more often than you think, that doesn’t stop them, and you risk falling prey to loan sharks or a scam company that will end up taking your car after you default on your long term loans. It happens a lot, which is why the vetting process is so important, in order to protect yourself from financial predators. But how can you do that?

Well, first of all, you need the knowledge – lenders must be registered with the Financial Conduct Authority (FCA) in order to be allowed to legally operate. And yes, that is something you can check. You can go on their website and look for the log of all the registered companies. If they do not have authorisation, you should not continue to entertain the idea of getting a loan from them.

Extra tip: The best course of action is to report them and allow the authorities to deal with the fact that they are breaking the law.

3.  Make sure they carry out an affordability check

If you’re in a position where getting a loan may be difficult, you may be tempted to think of a lack of an affordability check as a good thing. But you would be sorely mistaken. Generally speaking, any lending company will do a credit check, an ID check, an affordability check, etc. They will look into your background, financial history, employment, to make sure that you are able to financially sustain this loan.

And while if you can ill afford a loan, you might hope that they don’t do the affordability check, at the end of the day, it’s for your own benefit, rather than theirs. You see, any reputable lender will ensure that you can 100% repay the loan before granting you one, thus protecting you from going into debt, plummeting your credit score, or even going into bankruptcy.

Extra tip: The first rule of borrowing money is that you need to be able to afford to do so; a company that does not hold you to that standard is not a company you want to be financially entangled with.

4.  Read the contract carefully and look for any hidden charges

Finally, just as you’re ready to sign, there is one more thing you need to check, even if the lender has passed all of your other “tests”: read the contract backwards and forwards and make sure you understand every single clause in your contract.

The biggest mistake borrowers make is that they do not bother to read the paperwork, or they don’t understand it. If you miss anything, you may be surprised with hidden charges that you are now contractually obligated to pay, even if they were not disclosed beforehand.

That is exactly why you need to take some time and read the contract, no matter how much of a hurry you are in. If you don’t understand something, ask them to clarify, or better yet, use a free financial advice service and have them “translate” it for you.

You want to go into this completely aware of what you are agreeing to. It goes without saying that if at this stage, you discover any additional fees, do not go through with the transaction. Transparency and trust are paramount in this relationship, and if they’re hiding this from you, in what other ways are they going to scam you?

There you have them – 4 things to look for in a potential lender. Choosing your lending company is an important step and you have to make sure that the people handling your debt – and perhaps your possessions – are trustworthy. Take note of these tips and apply them next time you’re looking for a lender for your personal loan. Always do a general background check and make sure they are operating under the law. And remember that if something looks fishy, then it probably is, so you’re better off looking for a different, more transparent company to handle your borrowing needs.