People borrow money for many reasons — maybe your car broke down or an unexpected bill arrived and you can’t cover the expense out of pocket. No matter the reason, you no longer have to travel to a bank to get the funds you need.
Online lending can help you borrow money for an emergency quickly and easily. However, it’s important to understand your loan options before you make a decision.
How Do I Borrow Money Online?
To borrow money online, you’ll first need to decide which loan product is right for you.Then you can find a lender and complete an application. You can accomplish all of these steps from anywhere as long as you have an internet connection.
- Consider why you need a loan. When considering borrowing, it’s important to evaluate all your options. Emergency online loans may come with high interest rates and less favorable terms. You may want to consider other options to get the funds you need such as asking friends or family or exploring ways to make money fast. If you decide that borrowing is right for you, you’ll need to consider which product fits your situation. Some loans are designed to help with specific purchases, such as an auto loan. For more general purposes a credit card, personal line of credit or personal loan may be best.
- Decide how much to borrow. You’ll also need to decide how much money you want to borrow. Think about how much you need to cover the expense and how much you can realistically fit into your budget. Borrowing too much can make repayment difficult and can cause financial strain down the road.
- Find a trustworthy lender. There are a lot of lenders online, finding one that meets your needs may take a little research. You can compare lenders based on interest rates, loan terms, fees and eligibility requirements. Banks, credit unions and online-only lenders often offer ways to apply online, but online lenders often have more flexible eligibility requirements than traditional banks, which can make it easier to get approved.
- Complete your application. Once you’ve found a loan and lender, you can get started on your loan application. The lender will likely ask for your personal information, some basic financial information and they may also run a credit check. This information helps them determine loan terms like interest rates and loan amount. Online lenders typically offer fast applications and approval times while banks and traditional lenders may take longer.
- Review your offer. If you’re approved, take a moment to review your offer. Look at the interest rates, loan term length, the monthly payment and all of the associated fees like prepayment penalties and origination fees. Make sure the offer works for your financial situation.
What Type of Personal Loans Are Available Online?
There are many different types of personal loans available online such as personal installment loans, lines of credit and loans designed for borrowers with bad or limited credit history. It can be helpful to explore your options before deciding which is right for you.
Personal installment loans. A personal installment loan is a common type of loan. You’ll get cash up front that you can use to help cover general expenses and purchases. You’ll repay the loan over time through weekly, bi-weekly or monthly payments depending on your loan agreement.
Line of credit. A personal line of credit works similarly to a credit card, as they’re both types of revolving credit. If you’re approved, you’ll be issued a credit limit that you can draw money from. You’ll only be charged interest or fees on the amount you borrow and as you repay, the funds will become available for you to use again.
Bad credit loans. Some lenders offer loans designed for borrowers with bad credit scores or limited credit history. These lenders often have flexible eligibility criteria and may be able to approve those who have been turned down by traditional lenders. Be aware that these loans often come with higher interest rates and less favorable terms. Be sure to do your research and consider other options before applying for this type of loan.
No credit check loans. Some lenders may not run a hard credit check when reviewing applications. For no credit check loans, they may look at your income, employment or banking history to evaluate your application. These can be an option if your credit history is a concern, but they may come with higher interest rates.
Payday loans. Payday loans are a type of short-term loan. They’re considered a risky type of loan because of the high interest rates and short term lengths. This combination can make it difficult for borrowers to repay. Though they can be useful in emergency situations for those with a bad credit history who aren’t able to secure funds another way, borrowers should consider other loan options before deciding to take out a payday loan.
What Do I Need To Complete an Online Loan Application?
Requirements to complete an online loan application will vary by lender, but in general they’ll need proof of income, some personal information such as your Social Security number, and your banking information. Online lenders keep the application simple and straightforward, while traditional lenders like banks may require more information.
Here’s what you may need to apply through an online lender:
- Personal information and proof of identity.
- Bank account information.
- Employer and income verification.
Here’s what may be required to apply with a traditional lender:
- Personal information and proof of identity
- Bank account information
- Employer and income verification
- Monthly rent or mortgage payment
- Supporting documents such as recent pay stubs, W-2s or tax returns
- A utility bill to verify your address
- A copy of your driver’s license or government-issued ID
Can I get an online loan with bad credit?
Yes, it is possible to get approved for an online loan even with a poor credit history. Online lenders often have less stringent eligibility requirements than traditional lenders. They may offer loans with no credit check, or they may use alternative credit checks and other financial information to determine a borrower’s creditworthiness. Be aware that a loan for those with bad credit may come with a high annual percentage rate and less favorable loan terms. You should carefully consider your options before applying for these loans.
What Happens After I Apply for an Online Loan?
After you apply for an online loan you could be approved, denied or the lender may request some additional information before making their decision. Here’s what may happen in these situations.
You could be approved. If you’re approved for an online loan you’ll be given a loan agreement to sign. If you accept a personal loan or line of credit, you’ll receive a direct deposit in your checking account or be able to start making draws on your line of credit. When it comes to auto loans, student loans and mortgages, the lender will likely pay the dealership, school or seller directly. Once you’ve received your funds the repayment period begins and you’ll start repaying the loan on your first due date.
You could be denied. It’s not guaranteed that you’ll be approved for an online loan. Though many online lenders are able to work with those that banks won’t, they’re not able to extend credit to everyone. If you’re denied you can look into options that can help you save money, or you may qualify for assistance with your bills.
The lender may need more information. When you apply for a loan, the lender may need some additional information to help determine loan approval. If this happens, the lender will contact you with questions or a request for more documentation.
Will applying for an online loan affect my credit score?
If the lender you apply with conducts a soft credit check, applying for and receiving an online loan will not affect your FICO® credit score or show up on your credit report. However, before you apply, check the lender’s FAQs to be sure.
Once you have a loan, whether or not it will impact your FICO® score depends on whether the lender reports to the credit bureaus. If you choose a lender that does report to the credit bureaus, your application and payment history will show up on your credit report and could affect your score. You can usually find whether a lender reports to the credit bureaus on their website.
How Fast Can You Receive Money With an Online Loan?
Some online lenders can get you your money the same day or the next business day after you’re approved. Other lenders with a longer underwriting process may take two to five business days. How fast you can receive funds will vary by lender.
There are a few things that can impact how quickly you receive your money. Applying earlier in the day can help as applications submitted later in the day or over the weekend may not be processed until the next business day. Having all your documents and things like your checking account and routing number ready to go can also help you complete the application quickly and avoid back and forth with the lender.
Online Loans vs. Traditional Loans
Online and traditional loans can both provide you with the funds you need, but there are a few key differences. Online loans typically have a faster application process, more flexible eligibility requirements and quicker funding. Traditional lenders like banks and credit unions may offer lower interest rates for borrowers with strong credit, but often have stricter requirements and a slower process.
Pros of online loans.
- Online lenders typically have an easy application process and fast funding.
- The eligibility requirements are usually less strict meaning you could be more likely to get approved.
- You can apply from anywhere as long as you have an internet connection.
- If the lender doesn’t report to the credit bureaus it won’t affect your credit score.
Cons of online loans
- These loans may have high interest rates or less favorable repayment terms.
- On-time payments won’t help you improve your credit score if the lender doesn’t report to the credit bureaus.
- These lenders may offer small loans compared to traditional lenders.
Pros of traditional loans
- You could get lower interest rates if you have good credit.
- Traditional lenders often report to the credit bureaus, meaning your on time payments can help boost your score.
- If you want to make a large purchase, these lenders typically offer larger loan amounts.
Cons of traditional loans
- You may need good or excellent credit to qualify, and the lender typically does a hard credit check to determine approval.
- It can be more difficult to compare loan offers because of the longer application and approval times.
- It may take longer to get your money.
DISCLAIMER: This content is for informational purposes only and should not be considered financial, investment, tax or legal advice.
