Online banking is not a new concept. It’s been there for years. And now, thanks to advancements in technology and the availability of lenders, consumers can borrow money online.
The main advantage of online loans is that you can apply for them and get the money deposited into your bank account from the comfort of your own home. Not only are they convenient, but some lenders also offer affordable rates and less stringent eligibility requirements. Read on to learn more about online loans.
What is an online loan?
This is a loan offered online by an online lender or a traditional lender through their online service. Previously, the term online lender referred to government loans, credit unions, and other credits that were similar in structure to the bank but had a different source. However, these old fashioned loans are now considered part of the traditional loan market.
Most of the time, these loans are unsecured personal loans. However, some lenders may add other loan products to their offering. Just like traditional lenders, online lenders have varying requirements for their loans. That is why you should do a “soft search” on different lenders to see if you match their eligibility criteria and the credit score application.
What is the difference between an online loan and a traditional loan?
Now, many consumers prefer online loans to traditional loans. As such, some traditional lenders have also extended their loan services online. However, there are some things with online-only lenders that may or may not make them attractive, depending on what you prefer. Here are the differences between online lenders and traditional lenders;
- It’s all done online – with a traditional lender, you’ll walk into their offices and speak in person to a banker or customer representative. However, with an online loan, everything is done online. And the lender can offer telephone assistance if needed. If you live far from a bank or want to avoid face-to-face contact, an online loan may be right for you. But, if you want face to face clarification, a traditional loan will be better.
- Online loans have lower interest rates – the best thing about doing stuff online is that it eliminates the need to hire and retain expensive staff. As such, you can expect a lower interest rate on online loans. But it’s not always the case. Therefore, be sure to compare the rates offered by an online lender and a traditional lender before applying.
- Applications and reviews are quick with online loans – online-only lenders use automated systems that make it easy to apply for and review the loan. There is less paperwork with online loans, and the lender can use a program that checks things quickly without needing another person to check.
- Target Loans With Online Loans – Personal loans are the most common types that you can find online. However, some lenders may also have other loans designed for borrowers. It is easy to find a suitable lender for your needs. For example, some lenders offer bad credit loans while others are suitable for borrowers with excellent credit.
How fast can I get a loan online?
Emergencies are inevitable. And most people don’t plan for them. In an emergency, you will need quick access to cash. And that’s where online lending comes in. You can submit multiple prequalification requests to multiple lenders online to find the right one for you.
Some lenders offer same day financing. So, once you are approved, the funds will be deposited into your bank account the same day. However, most of the time, it will take 3-5 business days to get the money once your request is approved. The exact time depends on your bank and how quickly the lender approves your request. Also, if you delay uploading the required documents, you will have to wait a long time.
Again, note that some traditional lenders may deposit the money the same day you get approved. However, since the review of documents takes time, the process may take longer.
Can I Get a Loan Online With Bad Credit?
Yes. But you will have to look for a lender online that offers loan products for those with bad credit or new credit. Keep in mind that most will need a credit score of between 500 and 600, which could mean that your credit rating is bad or fair.
Typically, people with bad credit and low income may find it difficult to qualify for a loan. And even if they are approved, the lender can charge very high interest rates for a small amount of money.
We advise you to wait and improve your credit score before applying for a loan, except in an emergency. Or borrow the funds from your friend or family member instead of going the formal route. Also, you can ask a friend or relative to co-sign for you if they are creditworthy.
How Safe Are Online Loans?
Security is always a concern with anything done online. Fortunately, there are many legitimate and trustworthy online lenders. But, since the crooks are out there, watch out for red flags, for example someone who guarantees your loan will be approved regardless of your credit or income.
Don’t forget to read a company’s reviews and check them out on the Better Business Bureau. Also, avoid taking out loans with high interest rates, such as 60% to 200% APR, as they can be expensive to repair.