Your most common questions about online loans answered
Online loans are nothing new, and with hundreds of online lenders available, there is an abundance of opportunities and information when choosing an online lender.
Maybe you’ve never considered using an online lender, but you’re interested in learning more.
This article will answer some of the most-asked questions regarding online lending, so you can make better-informed decisions when it comes to your personal finances.
Are they legitimate?
The first question most people ask about applying for loans online is “Are they legitimate?”
The short answer is yes; acquiring a loan on the internet is just as legitimate as going to a bank. Both online and physical lenders can carry risk; which is why it’s so important to research who you’re borrowing from beforehand.
Predatory lending is a risk factor when you purchase a loan. Though there are regulations against unfair loan practices, sometimes certain businesses fall through the cracks; entrapping borrowers in ridiculous repayment or interest plans.
Online lending is certainly a legitimate practice, but just be sure you apply for money loans with a credible lender. It never hurts to look over customer reviews before buying a product or service.
Are they safe?
Your personal information is just as secure with an online lender as it would be with a traditional bank. No names, addresses, routing numbers, or social security numbers are shared or sold. This information remains private and is protected by federal lending guidelines that prohibit such practices.
Your information will be secure, with lending websites required to have the same level of encryption as a physical bank would. For a typical lending process, you’ll need to provide income verification, names, addresses and employment history, and your SS number. You’ll probably need to grant permission for a credit check too.
This information is securely processed and handled by trained professionals; so you can be sure your identity remains safe during your application process.
How much do they cost?
Depending on the type of loan you choose (installment, personal, payday, etc.) and your personal credit history and score, your loan will carry an interest rate similar to or possibly lower than traditional bank offers.
This is because online lenders don’t carry the same overhead costs that come with managing a brick-and-mortar location; their strictly web-based approach is aimed at keeping costs low for both themselves and their borrowers.
Your lender may also charge lender-specific fees on your loan; such as origination or setup fees. This is strictly dependent on the lender’s terms and doesn’t necessarily apply to every online loan.
Is online lending easier to obtain?
Certain online lenders look beyond your credit score in order to approve or disapprove your loan application. With finances constantly evolving, and the need for personal and small business funding at an all-time high, certain lenders have taken a different approach to the lending world; focusing more on people than strictly numbers.
P2P, or peer-to-peer lending, is a popular lending option for small businesses in which complex algorithms analyze the health of the business and make a loan decision based on that information. This can be much more in-depth and honest than a simple credit or financial history check.
Online lending takes about half the time of traditional lending, making it a convenient option as well as an affordable one. With traditional lending, you normally have to wait days or even weeks for a decision, but not before filling out mountains of paperwork and providing everything but an arm and a leg to the bank.
Where do I go to get one?
There are thousands of online lenders available on the web; each with their own terms, conditions, requirements, and reputation. It’s vital that you choose a lender with a reputation for honesty and customer service.
Choosing the wrong lender can be even more damaging than unexpected expenses, and borrowing more than you can reasonably afford to pay back can have dire consequences for your credit history.
Don’t be afraid to ask questions to narrow down your options, and be sure that whichever lender you borrow from has easily understood terms and conditions. An overly complex or difficult to read terms and conditions page is not necessarily indicative of fraud but certainly isn’t helpful in making an informed financial decision.
Photo by The New York Public Library
