A Beginner’s Guide to Online LoansPublished on October 8, 2021 by Daniel Azzoli
In an ideal world, we should all have a financial plan, and a big part of this should be a well-balanced budget. It’s the blueprint to spending your money, making sure you can pay your bills, being prepared for financial emergencies, and maybe even having a little left over for something fun.
But here’s the kicker — personal finances may not always go according to plan. A sudden influx of unexpected bills and emergency repairs can throw your budget into a tailspin.
Enter a potential emergency rescue – trying to get a loan online. Online loans may help you cover unexpected emergency expenses if you don’t have an ample cushion of savings in the bank.
What Are Online Loans and Can I Apply for a Loan Online?
In a nutshell, online loans refer to money you borrow over the Internet. They’re simply loans that you get online rather than in-person from a brick-and-mortar financial institution – so yes, online loans can be applied for online by design!
That’s not to say these brick-and-mortar financial institutions don’t offer online loans. In our glossary of terms, an online lender is defined as:
A lender that operates online and who may or may not have a physical storefront.
So, if you’re asking the question “can I get a loan online from my usual in-person lenders?”, the answer is potentially yes! Plenty of lenders with brick-and-mortar locations offer cash loans online in addition to their usual suite of financial products that are available in-branch.
Nevertheless, there is a large number of legitimate online loan lenders that are worth taking a look at. These financial institutions have no physical storefront, and all they offer or service are cash loans online.
How Do They Work?
Before you learn how to apply for a loan online or ask the question of “where can I get a loan online?”, it‘s important to understand how online loans and the online lending process work. Like most loans, an online loan starts with an application which requires you to share your personal information with a financial institution. Financial institutions may ask to see things like your full name, employment history, financial details, and Social Security Number to get a good sense of your financial health. These insights help them determine your creditworthiness, or how likely it is that you’ll handle their loan responsibly.
Until recently, the only way you could share this info was by visiting an established branch during its business hours. You would meet with a financial advisor, fill out forms, and go home to wait and hear if your request was approved. This could take days or sometimes weeks.
You can still do that today, or you can work with online loan lenders or service providers that have made the borrowing process more convenient.
With a tablet, smart phone or computer at the ready, you can apply for a loan anytime and anywhere you have Internet. Wondering how to apply for a loan online? All you need to do is fill out a quick online application once you’ve done research to determine what loan suits your situation the best.
If you’re approved, you may receive and pay off your loan without ever having to visit a financial institution or ATM first. You’ll receive your funds as a direct deposit into your bank account, and you may need to set up automatic payments to come from this account once it’s time to repay.
What Types of Online Loans Are Out There?
Our definition from before describes the application process you may generally see — that is, going online to request money — rather than detailing the type of loan product you can borrow.
That’s because there is not a single or standard type of online loan. Loans of all shapes and sizes — with varying uses, loan amounts, rates, and terms — make up a diverse ecosystem of online loans: short-term, long-term, personal and business. There are even line of credit options that fit the bill. Keep in mind that with this being the case, the answer to “where can I get a loan online?” may depend on what loan product you’re searching for (since not all companies offer the same product range).
Below, you’ll find some of the most common examples of online loans.
1. Title Loans
Title loans are short-term, small-dollar loans that may be subject to very high interest rates and require collateral. This means you have to secure your loan with the title of your vehicle or some other asset. If you default on your payments, your online lender may take your asset to recoup the value of your loan.
2. Installment Loans
With installment loans, the process of how to get a loan online, if approved, is simple: low- or high-interest installment loans arrive in one lump sum. But unlike some loans that are due back in one payment, you’ll pay back what you owe over a pre-determined series of payments (or installments). All told, it could take anywhere between a few weeks to even a few years to pay off.
3. Line of Credit Loans
Here’s how a personal line of credit works: rather than receiving all your funds upfront, if approved, you get a pre-determined line of credit limit that you may draw against as the need arises. Your payments are usually based on your use of your line of credit. For example, you may be charged interest and/or fees based on what you withdraw and not your overall credit limit.
What Are the Benefits of Getting Cash Loans Online?
Here are some of the perks you might enjoy if you’re considering applying for a loan online.
1. Easy Comparison
Doing thorough research into different loans that suit your needs is a great idea, and this is true whether you get a loan online or from a physical storefront. But with online loans, it’s easier to compare your options side-by-side. Once you answer the underlying question of “where can I get a loan online?” and have gathered a few potential online loan companies to research, simply flip between the websites of the various loan service providers to see how they measure up in real time.
2. Ability to Research Flexible Eligibility Requirements
Sadly, getting rejected for funds is one of the effects of bad credit, making it a challenge to find funding if you sport a less-than-perfect score.
If you have an unfavourable credit score, you may be wondering “where can I get a loan online with bad credit?” Well, with some additional research, you may be able to find lenders that offer loans catered to or that still compensate for consumers with subprime scores. While they might still check your score, they may round out your application by checking your employment history and income to determine your creditworthiness.
3. Convenient Experience
By offering the convenience of requesting funds online, online loan lenders streamline the borrowing experience. You don’t have to travel to a brick-and-mortar location, manage your trip to a storefront around your schedule and their business hours, and wait in line.
Instead, you can fill out everything you need over a website. In some cases, these sites accept applications 24/7. This means you can apply on your own time at your own convenience, even if that’s in the middle of the night.
4. Speedy Application Process
Because so much of the process is automated, the process of how to apply for a loan online works on a faster timeline. You may hear if you qualify in a matter of minutes, and if approved, you may receive your funds as early as the same business day.
The days of waiting for a check you have to cash are over. If you authorize direct deposit, an online lender can send the funds directly to your bank account. You may also set it up, so your payments are taken automatically from the same account.
Look out for Potential Warning Signs
Online loans may seem like an attractive option thanks to their ease, speed, and convenience. But they aren’t necessarily the perfect solution to every cash-flow problem.
Before you start figuring out how to get a loan online, be aware of and pay attention to the following details.
1. Online Security
Sending your personal information over the web may seem like business as usual in 2021. But don’t take it for granted. If the data gets handled improperly, you may be at risk of identity theft and fraud. Always check that a financial institution has the appropriate security measures in place to protect your data at every step of the borrowing process.
2. Higher Rates and Fees
Though figuring out how to get a loan online with bad credit in itself is not difficult, online loan lenders may charge you high interest rates and fees which may prove hard to handle. They may also limit how much you’re able to borrow.
If interest rates or charges are high, a loan may be difficult to repay. Always check in with your budget before you submit an application to make sure you can afford to make all your payments by their due dates. You should also check with the financial institution to see what the penalties are for paying off your loan earlier than the scheduled payments. If there aren’t and you’re able to do so, this may help to reduce how much overall interest you end up paying in the end.
Are Online Loans Right for You?
Maybe you need a little extra cash to pay for an unexpected round of antibiotics after a tenacious cough turns into bronchitis. Or maybe you need help buying a new tire after your old one suddenly blows on the highway.
If you don’t have the savings to cover an emergency expense or if things go unexpectedly wrong, online loans could be a convenient, simple, and quick solution. But not all online loans are affordable or secure. However, you won’t know until you shop around.
Do your homework and pay special attention to the rates and terms available for your financial profile. What’s more, only ever sign a loan contract if you know, without a doubt, you can pay back your loan on time. If you have any questions about what we do, get in touch today. We’re always happy to help.