Need money quickly and without a lot of hassle?
Lending options aren’t exactly limited. From credit cards to personal loans–options are out there.
Personal online loans are a great way to get money fast and without the hassle of going through your bank or other traditional lenders.
But if you’re looking to borrow money, don’t forget- if you’re not careful, debt can be easy to acquire, but tough to get rid of. Most Americans have about $8,000 in credit card debt, so make sure you know what you’re getting yourself into before you sign on the dotted line.
If you think one might be right for you, keep reading for an in-depth look at online loans, the pros and cons, and how to get qualified.
What Are Online Loans?
Online loans are simply a type of unsecured personal loan.
Personal loans typically have shorter terms–usually between one and seven years. Personal loans also do not require collateral like a home or auto loan.
The lender instead relies on the customer’s credit score and income. Because of this, the terms of the loan will depend heavily on the borrower’s financial situation.
How Can You Use an Online Loan?
With this type of loan, you’re not borrowing for a specific purchase, like a car or a house, so your options are a bit more open. In fact, your options are pretty much limitless.
Here are a few ways borrowers often use personal loans:
- Home improvements
- Large purchases
- Debt consolidation
- Vacations, or holiday expenses
- Unexpected expenses
Debt consolidation is a common use of an online or personal loan because the interest is often much lower than credit cards. It also allows you to put all your payments in one manageable place.
Qualifying For an Online Loan
Qualifying for a personal loan can be a bit more difficult than other types of loans or credit cards.
Since these types of loans don’t require any collateral, the lender has fewer options if you decide not to pay them back. Unlike a home or auto loan, they can’t just come take back the purchased item.
Because of this credit and income requirements are usually a bit more strict with this type of loan.
If your credit isn’t the greatest or you just don’t have enough credit history to qualify, you may be able to bring in a co-signer or co-borrower to help you qualify for a personal loan.
Understand Your Terms
Given that personal loans are unsecured, remember to make sure you understand what you’re getting into before signing anything.
With these types of loans, terms usually range from one to seven years. While interest rates are often lower, the rate you end up with will depend largely on your credit score.
The amount you can borrow and the term will also depend on your credit score, your income, and the lender.
Make sure you do your homework. There are a lot of lenders out there and a lot of options to pick from, so make sure you understand the terms of your agreement.
Benefits of Online Loans
If you’re considering a personal loan, here are a few of the biggest benefits:
Debt Consolidation
If you’ve got a few credit cards or other that you’d like to consolidate and pay off quickly, a personal loan can be a great way to do this.
With a longer term and lower interest, you could also lower your overall payments and free up some much-needed cash.
Lower Your Interest Rates
The average credit card comes with a whopping 17% interest rate.
With rates that high and payments designed to make your debt last for centuries, credit cards can be difficult to pay off in a reasonable amount of time.
Moving your credit card or other high-interest debts to a personal loan can help you pay them off much more quickly and save on interest at the same time.
It’s Your Money–Use It Your Way
Another big advantage of online loans is the ability to use your money however you want. Rather than being tied into a single purchase, you’re free to spend your money as you see fit.
Get Your Money Quickly
Another big advantage to personal loans is the speed at which you can request and qualify. With many online lenders, you can request and have answer in seconds, rather than days or weeks with a traditional bank.
Downsides of Online Loans
While personal loans have many benefits, they also have their downsides. Here are a few of the biggest negatives to these types of loans:
Those With Poor Credit May Not Qualify
While there are options out there for those with lower credit scores, many personal loans require fairly high credit scores. If your score is below average you probably won’t qualify for most of these types of loans.
If you think you might be on edge, check your credit score before requesting. Thankfully, most online lenders advertise their minimum requirements and getting a hold of your credit score is pretty easy these days.
Additional Penalties or Fees
This goes along with understanding all the terms before requesting.
Some online loans come with additional charges like origination fees and could even come with an early payoff penalty. While these things aren’t necessarily common, just know that they do exist and you should check the terms of your loan for them.
Putting It All Together
Online loans are a great lending option for many borrowers. They offer a lot of flexibility and often come with great terms and low-interest rates. Online lenders are plentiful too, with new ones emerging all the time.
Before requesting, just make sure you understand the terms and are aware of all your options.
Check out some your online loan options and find one that’s right for you today.