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What is an online loan?
You have to admit, taking out a loan from an online lender rather than a bank is quicker and more convenient. However, spotting the good and bad lenders is also crucial when taking out online loans, as there are many fraud and loan sharks online as well.
Taking Out Online Loans
What’s great about online loans is the fast approval. Online lenders can provide you with feedback almost instantly. You’ll know right away whether you’re loan application is approved or not. You’ll also be informed of how much you can borrow, and what your monthly repayments will be. While traditional lenders and banks may feature an online application, it still take a while to get an answer from them. In most cases, your application will go through several officers to review it first, and you might even need to visit a branch in-person.
Online lenders often charge less than you’ll pay elsewhere, especially when your credit rating is good. You’ll find online loans have lower interest rates and lower fees compared to regular loans. Since online-only lenders don’t have the same overhead costs as other lenders with physical branches, and they don’t face the same regulatory costs. This means they charge less, too.
If your credit score is low, you’ll most likely struggle getting a loan from banks, traditional nonbank lenders, and credit unions. It is easier to get a loan approved if you’ve got great credit history. But, if you’re still building credit or you’ve been through some hard times lately, a low credit score will do you no good.
Online lenders are more likely to approve even those with lower credit scores. These lenders use alternative information to evaluate your creditworthiness instead of running a hard credit check. Alternative information include your basic personal information, your income, monthly expenses, employment history, and even information from your social media.
You’ll find majority, if not all, of online loans are unsecured type of credit. You won’t need to put up an asset as collateral for your loan to be approved. Online loans as unsecured loans are safer for you than borrowing against your personal assets. If you fail to repay your debt, your credit score may drop, but you won’t have any of your assets repossessed and you won’t face foreclosure.
How to Borrow Online Loans
Taking out online loans is pretty much the same as getting any type of loan elsewhere, but online loans probably feel easier. When you need to borrow money, you could visit your bank for a loan. While banks are popularly known to offer personal loans, today you have the option of getting online personal loans.
Online loans streamlines and simplifies the process. You just compare rates and monthly repayments, and then prequalify. You apply on the lender’s website instead of visiting a local office branch. You get an instant decision, usually within minutes from the lender. Once you are approved, the lender transfers the money to your bank account in a matter of hours.
The Advantages and Disadvantages of Online Loans
Lending experiences vary by lender, your personal circumstances, and the type of loan you are taking out. However, as with any type of loan, you may encounter both advantages and disadvantages of online loans.
With online loans, you can complete the entire loan process from your computer or, in many cases, just using your mobile gadget or phone. Majority of banks offer online option, but you still need to visit a branch to complete the application.
“No Credit Checks”
Online lenders consider other matters than just your credit score when making a loan approval decision. Lenders will seek other information from you such as your income and expenses per month, your current address, employment history, and bank details.
Quick and Simple Comparison
Comparing rates of different online lenders is pretty easy and straightforward. Online prequalification takes only a few minutes. Comparison sites allow borrowers to see loan offers from multiple lenders after filling out a single application form. You can also utilize the lender’s loan calculator to see your possible monthly repayments with the certain amount of money you intend to borrow.
They’re Cheap, but Not the Cheapest
Yes, most online loans have lower interest rates. However, they’re not really the cheapest in the market. Online lenders vary according to their terms and conditions as well as loan features. So, you may get different rates from each one. Make a comparison of rates from multiple lenders before you take out online loans.
Possible Predators and Scammers
Reputable and licensed online lenders compete alongside predatory lenders online. Reputable lenders check your credit and your ability to repay the loan, as it is mandated by law. The rates and fees they offer are regulated and capped as well. Be extra cautious with lenders who advertise that they do not run credit checks.
How much money can I borrow online?
When applying for online loans, always ensure that the lender’s site is legitimate and secure before you provide your personal information. The URL should start with “https” instead of “http.” You should see a little lock symbol beside the URL. This means it is a secured site.
A reputable lender checks your credit rating. If the lender does not do a hard pull, you’ll be asked to provide other important personal information relevant to your finances. Many new online lenders consider more on the financial factors, such as your income and employment history or profession, but in relevance with your credit score and credit history. If an online lender says they do not check your credit at all, beware.