With online loans, the buzzwords you’ll usually come across are speed and convenience – and for good reason. You can easily complete the entire process from application to approval without leaving the house, and in some cases, even get your requested funds the next day. In this article, we’ll walk you through exactly how online loans work, what the application process looks like, and what to consider before applying for one.
How to Find and Apply for an Online Loan
If you’re just getting started, have no fear – it’s easy to find platforms that specialize in comparing online loans to help you find the right option. Once you’ve found your match, the application process begins.
First, you’ll be asked to enter some personal information like your name, date of birth, annual income, and other necessary details. Once you’ve submitted your application and it’s been reviewed by the lender, they’ll let you know if you’ve been approved or declined for your requested loan amount.
For security reasons, identity verification is a big part of the process. After being approved, you’ll typically be asked to provide a few documents that verify you are who you say you are (ID, bank statements, W2s, etc.). In the case of particularly reputable providers, a further security step will require you to respond with a verification code by an app or SMS.
The next step is to sign the contract and complete your application. Before doing so, it’s important that you review all the terms and conditions of the account before accepting the loan, like the timeframe, interest rates, and fees. Once you’re satisfied, all that’s left to do is digitally sign the contract. The money will be transferred to your account, possibly even the next day, and ready to be used in whichever way you deem fit.
How Do You Get an Online Loan?
Online loans are offered by a wide variety of lenders, including traditional banks, credit unions, and online-only businesses.
Keep in mind, the interest rate you receive may depend on whether you applied for your loan through a comparison portal or directly via the homepage of the provider. Lenders sometimes reduce their costs for the comparison sites to improve their chances against the competition.
What to Consider Before Applying for a Loan
There are always a few things you should keep in mind about how online loans work. So, whether you’re applying for a personal loan or a traditional loan from an online bank — make sure you think the decision through before getting one.
Merely taking out a loan may affect your credit score, and your record of paying it back could have a major impact on your credit history. It’s necessary to be honest with yourself about how much you need the funds and your capacity for handling the payments.
With that said, it’s important to keep the benefits in mind too. If you’re making a large purchase, a loan might be better than a credit card with a higher interest rate, especially when you consider that the extra load on your credit card could hurt your credit score if it pushes you close to the credit limit. Paying off an expensive loan with a cheaper one could also make sense and be a valid financial decision.
How Do I Choose the Right Online Lender for My Needs?
It may make sense to cast a wide net at first – however, you’ll eventually want to refine your search. While browsing online, it’s crucial to look for ratings and reviews of lenders and their products before you make a choice.
You can sort by the lowest possible interest rates, or have the website filter by your credit score. You can narrow your search by choosing a particular type of loan, like a personal loan or a small business loan, or even whether you would rather pay monthly or quarterly. The more precisely you focus your search, the more likely you are to find a loan that suits your unique needs.