If you are looking for a loan, chances are you don’t know where to turn. The online marketplace is saturated with offers, interest rates, APRs, and financial jargon designed to target you, but how do you know which vendors are really trying to help you from those who want to hide their fees in the fine print?
Our guide takes a look at everything you need to know when considering applying for a loan online. We’ve kept this balanced and informative to help you make a confident and informed decision about your future finances.
Let’s start with the advantages of online lenders:
You can compare your loans online
When shopping for loans, the biggest advantage of an online lender is that they can show you the best (as well as the cheapest – not the same) option for you! Many providers are ready to compare loans online for their clients and tell them if a competitor or another lender in the market is a better or more suitable alternative. Deciding to compare loans online can also give you more confidence in the financial product you have selected or lead you to a better option for your finances.
With modern technology, comparing loans with direct lenders or price comparison websites is unlikely to leave a question mark on your credit score. Indeed, sophisticated software is able to use the data provided by a consumer to assess his creditworthiness and reliability as a borrower. This is known as a soft search and you simply match your credit report.
The application process is so convenient
An online loan naturally has a completely online application process. This means that it can be completed at a time that is convenient for you, and while it fuels our on-demand lifestyle with our imperative need for total flexibility, it also gives us the ability to exit the app and be there. come back if we think we need to. This convenience, combined with access to information, can help educate consumers about the responsibility of taking out a loan and what it can mean for your future finances.
In turn, online loans have the same advantage as anything on the internet – it’s 24/7. This means that if you are applying for a loan because you need the cash quickly because something has gone horribly wrong on your vacation and you don’t have the funds to cover it, a personal loan can be there to help. , even if you’re somewhere along the equator!
Many online direct lenders, especially those operating in the consumer credit personal loan market, will be able to offer their clients pre-approval based on soft research. It’s less likely to be a guaranteed option for consumers with bad credit, but for those who are accepted, it gives a good understanding of where you stand and your creditworthiness.
Plus, submitting for pre-approval doesn’t affect your credit score, it just lets you track what offers you have. Consumers can always look for a loan that is right for you, if you have the time to do so.
Extremely fast access to cash
Using online lenders is an extremely efficient process. When you have decided that you need a loan to make the necessary purchases or move forward in your life or even to face an urgent financial emergency, you can apply and get the money in your account the same day. This quick action allows consumers to stay dynamic and react quickly to a current situation, which can also protect their credit in the long term.
An online lender is also more likely to work transparently and keep their clients up to date with the application process. Many text and email just to keep people up to date with the status of their loan application.
Quick access to cash is particularly beneficial with improved or increased loan limits online. Fintechs and direct lenders are experiencing a recovery, while traditional banks are experiencing a downturn and downturn in activity. This means that they are a bit more stingy with the amount they are willing to lend to their clients, whereas online lenders have so much investor support right now that they are more likely to give you access to all the funds you need. This can be particularly beneficial for those looking for debt consolidation or secured loans of a higher value.
Improved accessibility for people who have been denied credit
As has already been established, the decline in banking activity due to increased competition, traditional sources of credit are more risk averse than ever. This means that they can increase their prices to cover the cost of lending to someone who may not have the best credit history or refuse to work with them altogether.
As with all markets, including retail, there are so many more specialty and unique options and products available online! This also extends to the loan market; There are lenders online who specialize in certain types of loans, including those that are more suitable for borrowers who have not had a perfect loan repayment history.
Disadvantages of Using Online Lenders
Trust online lenders
Banks, building societies, and credit unions are usually the names we trust because we see them all the time, walking past their branches on the street, or seeing commercials on TV since we were young. Long-standing institutions have usually made a name for themselves, and whether it’s a good or a bad reputation doesn’t really matter, as we inherently trust the names we know.
In contrast, there are so many new players and fintechs available for online lending. This makes it all a bit intimidating and scary, especially if this is the first time you are applying for a loan or if you are especially nervous about working with a cowboy.
How to get around this? Check their background. You can verify that they are registered with the necessary regulator to ensure that they are a compliant and responsible lender in order to always take advantage of the awesome rates available online.
It might be better to go directly to your current bank account provider
One of the main advantages of going with a traditional bank for a loan is that if you already have an account with them, you can enjoy additional advantages. If you have a checking account, a checking account or even a savings account with a single provider, they can quickly assess your creditworthiness because they have experience and direct knowledge to interpret your compared to money. If this is positive and you have maintained good credit, paying off your loans, credit cards, and overdrafts on time, there may be incentives and other offers when you apply for a new loan. It could be something like interest-free months or cash back.
Sometimes this process is also streamlined and can also provide quick access to cash as the bank already has some of the information it needs. In turn, going directly to an online lender is usually the fastest way to access the money you need.
Over-reliance on price comparisons and ‘best value’ options
More and more often in our society we become obsessed with the cheapest options and pay the absolute minimum possible. That’s quite right, especially considering how much the cost of living is going up while wages remain the same. We are all just looking for more bang for our buck, no matter what we pay.
When it comes to financial products, it could be a bit more dangerous. Everyone hates having to pay for the privilege of having access to credit, but it is inevitable (the whole banking industry is founded on this), but sometimes we can become a little too dependent on the information that comparators give us. of price.
In reality, these websites do not provide completely unbiased information as they are sometimes sponsored by certain providers who claim to be at the top of certain requests or search results, although they are not the best option.
In turn, we depend on the information given to us rather than doing our own research, which is just as important (it is vital to check consumer credit websites for consensus on a creditor). We do not consider aggregates that intentionally abstain or subscribe to comparison shopping sites, although they may be a better option for some consumers.
In a post-Cambridge Analytica-scandal world, we are all becoming more and more aware of the use of our data and a little more stingy with the data that we voluntarily provide to companies or databases. This includes price comparison websites, where the amount of information required will vary.
The special thing about applying for a loan online is that different lenders (and brokers or services) may ask for quite personal information, including details about your financial history and what we might consider to be the most private and confidential things. about us.
Last words …
It is important to note that there are risks associated with all financial products and commitments, including loans. Financial literacy and self-confidence in financial matters are at an all-time low for Millennials and young people. This could be one of the reasons the same demographic gets into debt cycles and seeks help more frequently to get into debt. In turn, this only underscores how important it is to have a good understanding of the loans and financial arrangements you make, whether they come from online lenders or more traditional means of obtaining credit, such as banks. This can help you make sure you can stick to a repayment schedule and have a positive loan experience. Depending on how you like to consume the information, an online loan can offer another little advantage; the information is displayed in a simple and concise manner, and all the information is available on a website. If you go to a bank for the money you need, some things can get lost in the translation in the verbal communication and the whole process is more rambling, leaving a little more room for error.
Honoring a loan agreement is the responsibility of the consumer and it is important to maintaining a positive and healthy credit rating that repayments are honored no matter where you decide to get your credit. Yet going online for a personal loan gives you all the ability to compare the costs of different providers to make sure you’re comfortable with repayments.