2018 Guide To Online Personal Loans
An online personal loan typically refers to an unsecured loan taken out by you personally. Let’s cover few basics here to help you understand the terminology.
An personal loan (online or otherwise) represents money lent to you that is due back to the lender in “installments” or monthly payments over time. This means the whole of the loan is typically not due all at once (i.e. lump sum).
Unsecured means that you do not have to put up or sign over anything of value in order to obtain the loan. For example, “title loans” are often secured by signing over your car or boat title in exchange for the loan. IF you repay on time, the lender gives you your title back. However, if you fail to make repayment, the lender is able to seize your car, boat, or whatever you put up as “collateral.”
Additionally, failure to repay an online personal loan (or paying late) may result in negatively impacting your credit score. Because of this, you should plan accordingly to make sure you are able to pay back any amount borrowed within the timeframe outlined in the terms of the loan.
Can You Apply For A Personal Loan With Poor Credit
So, an online personal loan is an installment loan that is unsecured, applied for and taken out online from the comfort of your home or office. Because the lender is taking a larger risk by not having any collateral on file, the interest rate and fees for personal loans are normally a lot higher. On the flip side, you as a borrower do not have to risk your car or other item of value in order to obtain funding.
What are the requirements to get approved?
Like with most traditional forms of financing, respectable lenders will look at a number of factors on your application to determine eligibility. Things like current employment, salary, credit history, and more may come into play.
It is also important to note that each lender will have its own set of standards set internally by the organization. So while you may not qualify for one lender, you may in fact qualify at another. This is why we work with a large number of lenders to ensure that we can connect you to multiple providers thru one form.
As an example, someone with poor credit may be able to obtain funding based on their current place of employment and salary and lower debt levels. Conversely, someone with more debt but a good credit history might be able to obtain funding based on their past ability to pay on time.
Other requirements may include:
- Being 18 or older at the time of application
- Being a legal US resident
- Own a verifiable bank account
- Not currently in bankruptcy
- Not currently in foreclosure
Again, requirements vary by lender and the only way to know for sure if you can get approved and for what amount, is to apply online. The process is fast, easy and can be completed online from your PC, tablet or smartphone. The process takes about 2-5 minutes and you’ll have a response within a few minutes of submission.
I’ve heard of lenders NOT checking credit scores. What about those?
Some lenders do not require a “minimally accepted credit score” as a requirement for approval….but, that does NOT mean that they fail to check your credit report. In fact, almost ALL lenders with very few exceptions will check your credit report, even if they don’t have any “minimum” standards to apply.
If you happen to have a low or poor credit score, expect to pay more in interest rates and fees. While this may seem unfair, the lender is taking a larger risk on you based on your financial history. In exchange for this risk and providing you with funding, you are agreeing to pay a higher rate than someone with good credit.
For many with poor or bad credit scores, short term, payday and installment financing may be the only option to cover immediate financial needs that arise.
What are some benefits of an online personal loan?
- Debt Consolidation
Depending on the interest rate and terms, an unsecured personal loan might be a good option to consolidate other HIGHER interest rate loans under more manageable terms and rates. For example, if you are currently paying 36% APR on two credit cards, and you can get a personal loan at a rate of 22%, then consolidating might save you a substantial amount of money over time, as well as reduce your monthly minimum payment due.
- Opportunity to Improve your Credit Score
Borrowing money and paying on time can improve your credit score. The impact of this is substantial and can save you thousands in years to come. Improving your credit score will aid in helping you get future funding of any kind (auto loan, home mortgage, payday, installment, or even another personal loan) at a lower rate, making the cost of borrowing funds lower.
- Fast Access to Needed Funds in an Emergency
With traditional banks and lending institutions tightening their credit requirements and rejecting applications by the thousands, many individuals feel like they don’t have anywhere to turn.
This is in part why the popularity of personal lenders has skyrocketed over the years. While interest rates are indeed higher, these institutions are often the only ones willing to help those in need get the funding to help with a financial emergency.
In fact, getting funding is faster and easier than it has ever been, with online applications taking less than a few minutes to complete, and money being deposited into your account within 24 hours.
What about the downside of online personal loans?
- Higher interest rates and fees when compared to traditional loans
So is an online personal loan right for you?
This is a question that only you can answer. Everyone’s personal and financial situation is different.
Personal loans work best if they are incorporated as part of a longer balanced plan to improve your financial situation, or in the event of a financial emergency where you need fast access to funds for things like auto repairs, medical bills, rent, utilities or food.
They can also be useful instruments for consolidating higher interest debt into a lower interest rate loan.
Those who take out unsecured personal loans should always weigh their options, and only take out funding if they are confident they will be able to make re-payment on time. Once you determine a personal loan is a good fit for you, map out how much your payments will be, when they are due, and how you will pay them so you’ll have a good idea of what to expect moving forward.