Do you need money to go back to school or pay for unexpected medical bills? Read on to learn everything you need to know about getting a personal online loan.
In the last year, 34 percent of Americans — approximately 83.5 million people — have taken out a personal loan.
If you’re considering joining this group, you may want to consider looking into a personal online loan. There are lots of benefits that come with this option, but there are also some important things to consider before pulling the trigger.
Read on to learn everything you need to know about getting a personal online loan.
What Are Personal Loans?
A personal loan is a loan that can be used for just about anything, from a medical emergency to home renovations.
Personal loans are unsecured. This means that you can take them out without offering collateral in exchange.
Benefits of Getting an Online Loan
You can seek out a personal loan from your local credit union. But, it can also be helpful to look into online personal loans.
There are many trustworthy online lenders out there that can help you get a loan from the comfort of your own home. Some of the benefits that come with getting an online loan include:
Good for Emergencies
If you have an emergency and don’t have time to wait for a traditional lender to approve your application, an online loan is usually the best way to go.
They’re more efficient and you don’t have to waste time explaining why you’re looking for a loan.
You can’t beat getting approved for a loan right from your home. Online personal loans are very convenient — you can often get approved in under an hour. And, there’s no need to worry about driving back and forth to talk to different lenders and negotiate interest rates.
Banks and credit unions are typically quite picky when it comes to approving personal loans.
Online loans are much more accessible, even if you have a low credit score or no credit score at all.
Of course, your interest rate will vary depending on your credit history. But, you won’t automatically be rejected just because of your credit score.
There are lots of online lenders out there, and they all offer different interest rates and loan terms. It’s easy to shop around and compare when you’re just working on your computer, so you’ll be able to find the right lender to meet your needs.
Lower Interest Rates
Since there is no collateral or guarantee backing them, personal loans tend to have higher interest rates than secured loans (auto loans, home loans, etc.).
However, the interest rates are still usually quite a bit lower than the interest rates that come with most credit cards.
For example, many personal loans come with interest rates around 10 percent — although some have rates as low as five percent. By contrast, the average interest rate for a credit card is more than 16 percent.
Because credit card interest rates can be so high, personal loans a great option for people who need to consolidate credit card debt.
How to Take Out a Personal Loan
Do you think a personal loan is right for you? Follow these steps to get approved for a loan today:
Know Your Credit Score
Knowing your credit score will help you know what to expect from your loan. This is especially true when it comes to figuring out your anticipated interest rate.
If you don’t want to pay a lot in interest and aren’t in a rush for a loan, you might want to take some time to improve your credit score to get a better rate.
It’s easy to compare lenders when you’re looking for an online loan.
Make a list of lenders you’re interested in working with and try to get an estimate from each of them. Then, you can simply compare and contrast to see which lender has the best interest rate and repayment terms.
When you’re choosing a lender, make sure you vet them thoroughly to make sure you’re only working with legitimate companies.
Some things to keep in mind when looking for a lender include:
- Look for online reviews or ask for references from friends or family
- Check the lender’s credentials (they should be state regulated and have a good rating with the Better Business Bureau)
- Look for an online lender that has a decently long track record and quality customer service
- Look for contact details — even online lenders need to have phone numbers and business addresses
Don’t forget to read the loan agreement thoroughly, too. Be on the lookout for membership fees, application fees, pre-payment penalties, and other hidden costs.
Collect all Necessary Documents
When you’ve found lenders you’re interested in and are ready to start filling out applications, make sure you have all necessary documents handy first. This will save you time and help you get approved for your loan faster.
Documents you may need include: proof of income, your Social Security number, and your driver’s license number.
Complete Your Application
Now, you’re ready to fill out your application and get approved for an online loan!
You’ll typically get a response within a few minutes of submitting the application. And, if you accept the loan, you’ll typically receive the money a few days later.
Stay Safe When Looking for a Loan
As with any online business, some online lenders are less reputable than others. To avoid getting scammed while looking for an online loan, keep these tips in mind:
- Avoid any lender that requires an advance loan fee — you should have to pay anything upfront
- Avoid lenders who tell you that you need to buy loan insurance — remember, personal loans are unsecured
- Be wary of loans that don’t require any credit checks
- Avoid loans that come with pre-payment penalties
There’s no need to be afraid of seeking out a loan online. Just make sure you’re staying safe and reading all the fine print.
Looking for More Financial Advice?
Do you want to know more about managing your finances? Or, are you curious about the other types of loans you may qualify for?
Check out our other money-related articles today to keep learning!