How to Apply for a Loan OnlinePublished on October 30, 2020 by Daniel Azzoli
When you need to make a purchase or research a previously unfamiliar topic, this process often starts and ends online. The internet serves as what feels like a limitless resource of information, and a place to find seemingly any product you could ever need. So, when it comes to borrowing money, the internet may be a good place to start.
Whether you need help to finance a car, buy a home, or deal with unexpected expenses, there’s a good chance you can apply for a loan online. While filling out a personal online loan application can be a relatively straightforward process, there’s more to it than doing a quick Google search and going with the first option you see. Whenever you borrow money, it’s important that you do your research and take the right steps along the road. After all, this is your money we’re talking about, and you need to be careful any time you make a big decision that could affect your finances down the road.
Today, we’re going to walk you through some of the important steps that you’ll want to go through when you’re looking for online loans.
1. Check your Credit Score and Credit Report
Before you start the process of looking for an online loan, you’ll want to get your personal information in order. The first step is to check up on your credit score. As you may know, your credit score is one of the most important things that a financial institution may look at when deciding whether or not to lend to you. This three-digit number distills your borrowing history into an easy-to-understand metric that can have an effect on your ability to get approved, and sometimes also on the rates and terms of the online loans that may be available to you. You’ll want to know what this number is so you might get a better idea of what loans and rates you may qualify for.
To check your credit score, you can:
- Buy it from a major credit bureau – Experian, Equifax, or TransUnion – or a provider like FICO.
- Find it on a recent loan or bank statement, as certain financial institutions provide this information for their customers.
- Look online for a free or paid credit score subscription service.
You may also want to check your credit report, which you can do once a year for free with each of the three major credit bureaus we mentioned earlier. Look over your report and see if you can spot anything that looks out of the ordinary. Why? Well, from time to time, errors may crop up on your report that could be damaging to your credit score or could even be a sign of identity theft. If you do spot any faulty marks, take a look here to see how to go about getting them removed from your report.
2. Research and Compare Financial Institutions
Now that you have your credit score in hand, it’s time to dive into some important research! You’ll want to get a good idea of what your potential options are, and with online loans, that process starts… well… online. Scour the internet for financial institutions offering personal online loans that are suited to your particular needs and that are offered in your state, read reviews, and try to narrow your options down.
When evaluating different loans and institutions, there are a few important factors you’re going to want to take into consideration. These include:
- The amount of money you’ll be given: You may need a certain amount of funds based on your needs, and some financial institutions may be willing to give you more than others. This should be an important consideration for you when determining which loan to apply for.
- Interest: These are the fees you’ll be charged as you pay off your loan. A higher interest rate will likely mean that you end up paying more money over the course your repayment period.
- Fees: In addition to interest, you may also have to pay certain fees associated with your loan. This could include something like an origination fee. Not every loan will have fees though, so make sure to look into this before submitting an online loan application.
- Loan Term: The term of a loan indicates how long you’ll be paying it back for. Depending on the type of loan, the longer the term, the smaller the payments may be for that loan amount. Look out for a loan with a term that’s suited to your financial situation.
Another factor to consider is what to do if you have a bad credit score and are having a hard time qualifying for a loan with favorable terms. If you’re in this position, you may want to consider personal loans for bad credit. Institutions that offer these loans may consider your credit score, but generally weigh things like your income more heavily which may give you a better chance of qualifying. Keep in mind that because the financial institution is taking on more risk by lending to someone with poor credit, the rates for these loans are typically high. You should only consider applying for one if you need to deal with some emergency expenses and your emergency savings fund won’t cover them.
3. Submit Your Online Loan Application
Once you’ve done some thorough research, you’ll hopefully have been able to earmark a particular loan that you’d like to submit a request for. So, the next step is to finally submit an online personal loan application.
Like we’ve mentioned, a financial institution is going to evaluate several different things when deciding whether or not to lend you money. This could include things like:
- Proof of employment
- Proof of your sources of income
- Driver’s license
- Social Security number
- Pay stubs
- Bank account information
- Housing costs
The financial institution will use this information along with your credit score in order to determine your creditworthiness. Try to have this stuff ready ahead of time. The more you prepare in advance, the faster this process may go.
4. Receive Your Funds
Now that you’ve submitted your online loan application, it’s up to the financial institution to lend to you or not. In some cases, they may be able to get back to you fairly quickly. If you’re approved for a loan, you should receive an offer with specific terms, rates, fees, and other information laid out in your loan agreement. Read over everything carefully, and if the loan meets your needs and you can comfortably afford to repay it, accept the offer! The amount of time it takes to receive your funds can vary between financial institutions.
Be Thorough Before Filling out an Online Loan Application
Whether you’re looking for a personal line of credit to help with an emergency expense or another type of personal loan for any number of other reasons, you can typically start online. This process doesn’t have to be bogged down by commuting from one financial institution to another, organizing your schedule around a storefront’s hours, or standing in lines with waiting customers.
If you have all your personal information in hand, the entire process of researching and submitting an online loan application can be done in one day! You may even be able to receive funds in a single day depending on the financial institution. Just make sure you’re thorough in your search for the right loan, evaluate all your potential options, and look for what’s best for your situation.