Unlike traditional personal loans from banks, online personal loans can be processed and obtained entirely over the internet. Through a secure website, you can complete and submit an application, get a decision quickly and have the money deposited directly into your bank account within a day or two. Given how convenient online loans are, it’s easy to see why they have skyrocketed in popularity over the last few years. Are they right for you, though? Read on to learn more.
The Problem with Traditional Personal Loans
There are many hurdles to overcome when it comes to obtaining traditional personal loans from big banks and other major lenders. For starters, many big banks are entirely out of the personal loans business. Those that do still offer them have very strict requirements. To be considered for one, you typically must visit a local branch and fill out significant amounts of paperwork. Most problematic of all is the fact that you typically need to have either very good or excellent credit to qualify. Needless to say, this prevents many folks from being eligible for such loans.
Online Personal Loans
Since traditional personal loans don’t have much place in today’s fast-paced world, it is especially helpful that online loans are readily available. The application process for these loans is generally very straightforward and typically consists of completing a simple online form. Although your credit will be checked, the requirements tend to be far more lenient, so people with less-than-perfect credit are more likely to qualify. Online personal loans are offered by many credit unions and by the vast majority of new lenders.
Good Online Lenders Versus Bad Online Lenders
Online lenders are not created equal. The trick to obtaining the right personal online loan is identifying a reliable online lender. There are a few things to keep in mind. First, a good lender will check your credit history and will assess your ability to repay. Bad lenders don’t bother. A good lender will charge an interest rate of 36 percent or less while a bad lender will charge rates that soar into the triple digits.
How to Shop for Online Personal Loans
If you’ve never obtained an online personal loan before, you are probably unsure about how to proceed. Here are some quick and easy tips for securing an online personal loan that suits your needs:
- Interest Rate – As mentioned previously, a good online lender won’t charge more than 36 percent for interest. Many offer interest rates that are well below that. This matters because the higher your interest rate is, the higher your repayments will be. Some lenders offer payday installment loans that can be repaid over longer periods of time, but the interest accrues quickly and can be prohibitively expensive.
- Security – Unfortunately, shady online personal loan companies are out there. Weed them out by ensuring that the lender that you are considering has a secure website. Their URL should begin with HTTPS instead of HTTP. Look for security badges, including one for their SSL, or secure socket layer, encryption technology.
- Credit Check – If your credit isn’t so great, you may be relieved to hear that a lender won’t check it. However, you should stick with online lenders that run credit checks. Most take other factors into consideration too, like your work history and educational history, and they can mitigate bad credit to some extent. Others can perform a “soft credit check” that doesn’t affect your score to give you an interest rate quote.
- Documentation – Finally, make sure that you have the documentation that you will need before applying for online personal loans. You can be sure that your lender will want you to confirm your identify by providing some form of identification. You will also have to show proof of income–W-2s and paystubs typically work for this. Online lenders let you upload these documents, which makes the process fast and easy.
When you are in a pinch and need a quick personal loan to get you through a rough patch, you can’t beat the convenience of online loans. Just keep the tips above in mind to ensure that you get a loan that suits your lifestyle, budget and needs.