Need a personal or business loan? Find out why online lending may be a viable option
Need to borrow money for business or personal reasons, but not sure where to go? Traditionally, a bank would have been our first port of call. But today there’s a growing market in online lending.
Find out how online loans work, why they’re often able to offer lower interest and faster turnaround than traditional loans, and whether they might be the right choice for you.
What’s the catch?
With lower interest rates, faster approval, and smart lending that looks at more than just your FICO score, online lending can seem too good to be true at first consideration. But is it really?
Lower rates and fast turnaround are the main sellers of online lending. Without brick-and-mortar sites to upkeep, these banks and lending services can operate solely on a web-based platform, meaning you’re not paying for those overhead costs in your interest rate.
Companies like Upstart have also started using AI and machine learning in their lending process. The AI learns and adapts to market trends and users, and factors more into the approval process than just your credit score. This enables them to maintain some of the highest customer ratings in the industry.
So, what’s the catch? The catch is the same as with traditional lenders; there’s always room for a scam. Just as you wouldn’t go to a back alley loan shark for a business loan, so you should avoid suspicious online lenders.
Research your online lender carefully
Before you make a decision on your loan, research who you’re borrowing from carefully. Does the company have good reviews? No reviews? Are they FDIC insured? Are there any common complaints? Do they offer decent interest rates?
The same questions you would ask of a bank you should be asking of your online lenders. The last thing you want to do when attempting to secure a loan is to surrender your personal information to the wrong person. This can set you up for a myriad of issues, including criminal interest rates and predatory lending or, even worse, identity theft.
Overall, online lending is very safe and secure, and legitimate lenders have the data and customer reviews to back it up. Those are the lenders you should be borrowing from.
Is an online loan right for you?
If you’re looking to secure funding for personal expenses, business, or a large purchase, then online lending can most certainly be a viable option for you.
However, you need to shop for a loan in accordance with what you need. If you can’t nail down a loan at a traditional bank because of your credit score, then an online lender may be a good option for you.
Make sure you know exactly how much you need to borrow before approaching any lender, and be aware of your credit score. It’s essential you check your credit report before applying for a loan, so that you’re aware of what to expect in accordance with your financial history.
Online lending often has a quick and easy application process
The great thing about online lending is the application process usually only takes a few days. Some sites even offer decisions within a few minutes, meaning you get your money quicker.
Traditional banks can take several business days or even up to an entire week before they reach a decision. If you need funds quickly, that may not be an option you can afford. Online lenders offer quick turnaround rates so you can be sure to get what you’re looking for as soon as possible.
The risk remains the same
As with any loan, you’re taking a risk when you sign the papers and receive your money. No matter how much you borrow, you’ve signed a legal document agreeing to the terms of the loan, and that you’ll pay it back plus interest.
Traditional loans and online loans carry the same level of risk. You’re borrowing from someone, and the results of the loan, for good or ill, will end up affecting your credit score. Never take out a loan you’re not certain you can afford the monthly payments on, and always have a backup plan.
The customer service is often excellent
Most online lenders have very high ratings from their customers, mostly due to the excellent customer service they provide. Upstart, for example, is one of the top-rated lenders in the industry, besides being the first to integrate AI into their lending system.
Without a good customer service base behind them, an online lender shouldn’t be taken seriously. You’re likely to run into issues or questions during the loan process, and you’ll want trained professionals to answer your questions.
Could an online loan be right for you?
Whether you’re looking to cover personal expenses, launch your first business, take that vacation you’ve always wanted, or renovate your house, online lenders have a loan to fit your needs. Online loans are secure, and as long as you do your research, you’ll be confident in who you’re borrowing from.
Remember to choose companies with high ratings and always compare interest rates when shopping for a loan. Know exactly how much you need and what it’s for, and get a copy of your credit report before you start looking.
Photo by Christin Hume