What personal loan complaints reveal

The Consumer Financial Protection Bureau (CFPB) has been accepting complaints since 2016 from consumers who have had issues with loans through online marketplace lenders. All complaints made since then can be found online on the Bureau’s Consumer Complaint Database.

The CFPB received over 1.2 million complaints in 2022, and 9,800 were related to payday loans, title loans or personal loans. The major themes of these complaints range from trouble receiving loan funds to trouble making payments and unexpected fees.

If you are considering taking out a personal loan with an online lender, you may want to consider some of the issues that previous borrowers have run into, in addition to researching individual lenders.

Online lenders versus traditional lenders

Online lenders offer unsecured personal loans that allow consumers to consolidate debt, renovate their homes or pay for large expenses. Online lenders typically have lower interest rates and fewer fees and can be faster and more convenient than traditional bank loans.

However, traditional banks offer the in-person service and dependability that online lenders can lack. The CFPB had online lenders in mind when they began accepting customer complaints in a public database. The intent is to keep lenders honest about their practices.

Personal loan complaints in 2022: major themes

Out of the 7,200 personal loan complaints the CFPB received in 2022, 800 were from borrowers who were charged fees or interest they did not expect to pay. This was the most common complaint the CFPB received from personal loan borrowers in 2022. Another major complaint from personal loan borrowers surrounded problems when making payments.

Unexpected fees or interest

Customers who experienced unexpected interest and fees with personal loans generally complained about receiving higher interest rates than initially quoted. Customers also felt the lender did not openly disclose fees.

Many personal loan complaints about unexpected interest and fees were from borrowers who did not have an accurate estimate of the interest they would pay before signing on for a loan. For example, one customer who submitted a complaint about an installment loan was told they would receive a “special rate” after fulfilling the requirements of their first loan with a company at 13 percent. The customer learned later on that the rate on the new loan was in fact more than double the interest, at 27 a percent rate.

A borrower in Missouri learned that their creditor was charging 158.82 percent interest on their installment loan, in breach of both the signed contract and state law. They, too, submitted a formal complaint related to unexpected interest charged on the loan.

Many other complaints about unexpected interest and fees were from customers blindsided by added fees. Another borrower who had taken out an installment loan requested a payoff quote to settle their debt in full. Because the company did not process payment in a timely fashion, the payoff quote was inaccurate by the time payment was applied, resulting in subsequent unexpected fees on the borrower’s account.

Problems when making payments

Customers who reported problems making personal loan payments generally complained about unresponsive customer service, , lenders not notifying them when there was a problem processing their payment and lenders being unwilling to negotiate due dates and late fees.

Unresponsive customer service

Several borrowers complained of unresponsive creditors who did not make account access or payment reasonably simple.

One borrower complained that they were unable to log into their creditor’s website or app to review account information or make payments. In addition, they were unable reach their creditor’s customer service department, and thus would be unable to make a timely payment – even though they wanted to.

Payment processing problems

Several personal loan borrowers complained of not being notified when their payments had not gone through and subsequently being charged added late fees.

One borrower who had taken out an auto loan paid to bring their account up-to-date. Two customer service representatives provided conflicting information, and the borrower’s account was placed in “delinquent” status, though they’d made their timely payment on a recorded line.

Payment negotiations

The most common borrower complaint about making payments is lenders being unwilling to negotiate with them during hard times. These complaints tended to be more general, with borrowers attempting to communicate with lenders about needing to extend their payment due dates or otherwise having a difficult time paying off their loans and generally receiving little to no help.

While some lenders will negotiate with you and offer extensions and grace periods on late payments, they are not obligated to do so and some lenders have strict policies and fees.

Difficulty getting a loan
About 12 percent of complaints in 2022 were tied to difficulties obtaining a loan. For example, one consumer who said they had a history of making full, on-time debt payments was still denied a loan. Another prospective borrower expressed similar frustrations pointing out that they had “a great score with not a single missed payment” and was denied a loan nevertheless.

Tips to avoid problems with your personal loan

While personal loans can be a great option for people who need extra cash and have the financial security to pay back the loan on time, it is very easy to overlook fee and interest rate disclosures, miscalculate what you will be paying in interest or even fall prey to predatory lenders if you are not careful.

Read the fine print

Before deciding on a lender, it is extremely important to know exactly what fees you will be charged, as well as how high your interest rate could be. Many lenders are not particularly transparent with this information, often including these disclosures as footnotes on their websites’ bottom of the product’s page.

Make sure that you have all of this information before deciding to go with a particular lender. Also, carefully read the terms and conditions and any other documents the lender sends you while getting the loan.

Know what you will pay in interest

Many of the personal loan complaints the CFPB received last year were from people who ended up paying interest they did not expect to pay. Remember that you may not always qualify for the lender’s lowest interest rates. Any estimate you receive from an agent before the lender runs a credit check and looks into the full scope of your financial health may be inaccurate.

Before taking out a loan, calculate your projected interest rate and make sure that you are prepared to make payments given this added cost. If you have less than stellar credit and want to find a lender that will offer reasonable rates for your credit bracket, look into a bad credit loan.

Shop around and compare lenders

You should always shop around and compare lender rates and other details before committing to a specific lender. Different lenders work best for different circumstances. Compare top lenders and consider your full financial picture as well as how you intend to use the loan before making a decision.

Watch out for predatory lending

While there are a variety of legitimate online and brick-and-mortar personal loan lenders available, there are also plenty of personal loan scams and predatory lenders out there for consumers to be wary of.

Beware of deals that seem too good to be true and lenders that pressure you into making a decision. Also, beware of any phone calls or promotional emails received from lenders.

To find out if a lender is legitimate, look up customer reviews, BBB accreditations, and Bankrate reviews.

Borrowers should try to avoid payday loans if possible, as these loans tend to carry extremely high interest rates and are known to launch borrowers into a cycle of endless debt. If you are considering taking out a payday loan, consider an alternative method of borrowing funds.

How to make a complaint about your personal loan

You can file a complaint about your personal loan by visiting the Consumer Financial
Protection Bureau website.

Each week the agency forwards more than 10,000 complaints to companies for response. When submitting a complaint be sure to state your problem or concern clearly and concisely. You won’t be able to submit the same complaint twice so it’s also important to include all of the relevant information the company you’re complaining about will need to respond. In addition, you’ll want to be sure to include important dates, amounts, and relevant communications you may have had with the company in question.

The CFPB website also allows for including up to 50 pages of supporting documents when making a complaint.

Bottom line

The personal loan complaints received by the CFPB in 2022 reflect borrowers’ need for greater transparency from lenders about fees, interest and the payment process. They also reveal a trend of borrowers having difficulties paying off their loan products, due to either lack of preparedness on their part or lack of transparency from the lender.

The main takeaway from these complaints is that borrowers must remain vigilant to avoid predatory lending and ensure that they know the exact terms of their loan agreements.