There are distinct advantages in doing business locally. That includes lending institutions.
People in need of a loan often start their search online, due to the vast selection of options available in the online loan market. There are even sites that will have you fill out one form and shop it to multiple lenders.
Unfortunately, the best interest rate doesn't always mean you're getting the best overall terms. Borrowers may be surprised by some of the complications and fees that can come up when borrowing from an international lender.
3 Good Reasons to Avoid International Loans
Competition is generally good for the consumer, but comparing domestic lenders to their international counterparts is difficult to do on an apples-to-apples basis. Here are three main areas of concern with choosing a lender from outside the United States.
- Communication: Foreign nations are usually located in different time zones, seriously hampering a prompt response to any issues you may have. You'll rarely find a phone number you can call for customer service at an online international lender. If there is one, it's a call center likely located in another country, and not necessarily the country of origin for the lender or the consumer.
- Oversight: The United States government has instituted multiple regulations on lending that are designed to protect the consumer. There are also governing bodies such as the FDIC and Consumer Financial Protection Bureau that you can turn to when you have issues with a domestic lender. You can do that internationally also, but the odds of penalty to or recourse from the lender are pretty slim.
- Regulatory Defense: The Code of Federal Regulations (CFR), administered by the Consumer Financial Protection Bureau (CFPB), was created to give consumers the backing they need for regulatory defense against lenders and banking institutions. Penalties for violating any of the regulations in the code are steep, so lenders in the United States have to adhere to them.
International Lenders and The Truth in Lending Act (TILA)
The Truth in Lending Act (TILA), which is Regulation Z of the CFR, was enacted in 1968 to protect consumers from unscrupulous and fraudulent lending practices. According to the CFPB, the regulation applies to any lender doing business with US citizens, regardless of location.
On paper, TILA appears to protect you from fraudulent international lenders, but it lacks the teeth to enforce any real penalties in foreign countries. If your lender doesn't have a physical location inside the United States, there's nothing stopping them from continuing to operate.
The best way to protect yourself is to only do business with domestic lending institutions. You can find them online also, the rates and terms are competitive.
Notice: Information provided in this article is for informational purposes only. Consult your financial advisor about your financial circumstances.
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Original Source: 3 Reasons to Avoid Taking Out an International Online Loan
