All About Online Loans
If you want your finances to have a stable ground to stand on, it helps to have a financial plan. This means you’ll need to know how much money is coming in, be aware of where it’s going, and have a well-oiled budget in place. Otherwise, managing things like your rent or mortgage payments, your bills, and your food budget may end up being a challenge.
But even the best laid plans can go awry. How can this happen when it comes to your finances? One way is through an unexpected emergency. So, when an emergency expense throws a wrench into your budget, where do you look to? If you don’t have an emergency fund on standby to help you handle these situations, you may want to consider turning to online personal loans.
These personal loans may help you to weather the storm when you’re facing emergency expenses without the savings to handle them. But the truth is, there are a relatively wide array of online loans out there designed for different uses. So, we’re going to sift through some of the noise and break down some key components of borrowing money online, and go over some of the different types of online loans out there.
What Are Online Loans?
Put simply, with an online loan, the borrowing process is done primarily online. This includes the application, approval, and funding. This stands in contrast to most loans that you would apply for through a brick-and-mortar location.
This doesn’t necessarily mean that financial institutions with storefront locations don’t offer loans online. They may very well offer these types of loans in addition to the borrowing options they offer through in-person customer interactions. Regardless, whether it’s through an online lender or another type of financial institution, online loans are offered online.
What are the Potential Benefits of Online Personal Loans?
Now that we’ve defined online loans, let’s go over why you might actually opt for one in the first place. Here are some potential benefits you might experience if you decide to borrow money online.
1. Easy to Compare Your Options
Whenever you’re in the market for a loan, it’s always a good idea to look around for the option that would suit you best. With online loans, you may have an easier time comparing different options up against one another. Just pull up the websites of different financial institutions and compare the options they have available.
2. High Level of Convenience
One of the biggest benefits of online loans is the convenience of the borrowing process from the start. There’ll be no need to find the time to travel to a storefront, wait in line to be seen, and then spend the time talking to a representative in person. Instead, you’ll be able to go through the majority of the process from the comfort of your own home (or anywhere you have internet access). With some institutions, you can even start the application process 24/7, meaning you can apply whenever it suits you best.
3. Fast Application Process
When you’re borrowing money online, a lot of the process may be automated. Because of this, things can progress on a faster timeline. With certain financial institutions, you may be able to hear back on whether you qualify or not in minutes, and you could get your money in a business day or two -sometimes even less. This will vary between institutions.
Additionally, you won’t need to twiddle your thumbs waiting for a check to come in the mail. Instead, the money you borrow online will typically be deposited directly into your bank account.
4. Options to Research Different Eligibility Requirements
If your credit score isn’t the greatest, you may have a harder time getting approved for certain types of loans. Unfortunately, this may be one of the effects of bad credit.
However, if you do have less-than-perfect credit, you might have an easier time researching for a loan online that’s available to people with subprime credit scores. While your credit history may still be a factor, you may find a financial institution that may weigh other factors more heavily, like your income and employment status. The necessary requirements to be approved for unsecured online loans will vary from one financial institution to the next.
Types of Online Loans
Like we mentioned earlier, there are plenty of different types of online loans out there, all with their own specific qualities and uses. We’re going to go over a few of the most common types.
Unsecured vs. Secured Personal Loans
One of the main distinctions between different types of online loans is whether they’re unsecured or secured. With an unsecured loan, you won’t need to provide collateral to get approved. Financial institutions are typically taking a bigger risk with these loans, so they may have relatively high interest rates and/or fees.
Secured loans differ in that they will require you to put up an asset or assets as collateral. This means you’ll need to give the financial institution something of value in the case that you default on your loan.
A common example of this type of loan would be a mortgage. In this case, the asset you’re putting up as collateral is the home you’re buying.
Online Installment Loans
With online installment loans, you’ll be given a lump sum if approved, and you will be required to make scheduled payments over the course of a pre-determined period of time. Your payments will typically include your principal balance along with interest and/or fees.
Online Line of Credit
If approved for an online line of credit, you’ll be given a pre-determined credit limit that you can use when you need it. Your payments will reflect the amount of credit you use along with any interest and/or fees, not the total limit of your line of credit.
A line of credit is a revolving form of credit, meaning that as you pay down your balance, you can continue to draw money as needed. You can only do this if you have available credit and your account is in good standing.
Applying for a Loan Online vs. In Person
One way to determine whether applying for a loan online instead of in person is the right choice for you is to ask yourself some important questions, like:
- What’s your comfort level with technology? While applying for online personal loans won’t necessarily be complicated, you may need a basic level of technical ability to at least navigate through a financial institution’s website and manage your account online.
- Will you have a hard time getting to a storefront? If you live far from your nearest storefront lender, rely on public transportation, or work unconventional hours that may not line up with a financial institution’s, cash loans online may be a convenient alternative to going to a brick-and-mortar location.
- Would you prefer face-to-face communication? When you’re trying to apply for online loans, you may not have as easy of a time as some people while staring at a screen. To you, this may feel like an impersonal and isolating way of getting the service you’re looking for. An in-person borrowing experience may give you the personal experience you’re looking for.
- How quickly do you need your loan? The amount of time it takes to get your funds can play a big role in determining whether you opt for an in-person or online loan. If you need money right away, quick loans online, where quick refers to the speed of the application process, may be the right option for you.
Determining the answers to these types of questions may help you get a better understanding of whether you’re more suited to an in-person or online loan. If you want a deeper breakdown on the differences between these two, take a look at this article.
Frequently Asked Questions
How much can I borrow with online personal loans and what are the requirements for loan approval?
There are a number of different factors that can impact how much money you’re eligible for if you’re approved. This can include things like your level of income and what the maximum loan amount is in the state you reside.
It’s also important to understand what the requirements will be to qualify for an online loan. This may not be the same from lender to lender, but they might consider things like:
- your state of residence
- your employment situation
- if you have a regular, consistent source of income