What Are Online Loans? Is It Worth Taking a Loan Online?

Online loans are a type of loans that can be obtained via the Internet.

Currently, there are many microfinance organizations that allow you to receive money in this way. The borrower only needs to go to the appropriate website and apply. If approved, the company will send money to a bank account or electronic wallet within a few minutes. Online loans are fast. They are suitable for those who need finance urgently.

Differences between online loans and regular loans

If we compare online loans issued by microfinance companies and bank loans, then you see several significant differences:

• Speed ​​of application. An online loan will be issued in a matter of minutes, and it will take a lot of time to get a regular bank loan;
• Paperwork. To get a loan online, you only need some basic documents: SSN and government-issued ID. To apply for a bank loan, you will have to collect a lot of documents, including an income proof certificate;
• Approval rates. Applications for online loans are approved much more often than for regular loans. Microfinance companies work even with clients who have a bad credit history. Moreover, they offer credit score improvement programs;
• Interest rates. Online loans are attractive in many ways, but the interest rates here are always higher than in banks;
• Loan terms. Online loans are issued for a short period, most often for up to 30 days. They should be considered as an opportunity to quickly solve the problem and return the money immediately.

From the foregoing, it can be seen that in some ways online loans are more attractive than bank loans, however, there are some nuances. Each person in need of money can analyze existing offers and choose the most suitable option.

Why are online loans so popular?

Many people apply for a loan online, and the popularity of this product is constantly growing. There is nothing strange in this, because the number of microfinance organizations is increasing, and they offer a variety of loan products. There are several reasons why online loans are so popular:

• Accessibility. You can apply for a loan online without leaving your home. To do this, it is enough to have a computer with Internet access. To receive money, you don’t even need to go to the lender’s office because funds are transferred to a bank account or electronic wallet;
• No paperwork. To borrow money, it is enough to have only an SSN and a government-issued ID. There is no need to provide other documents. Microfinance companies do not require income statements either, which is very convenient for people working unofficially;
• Fast funding. It won’t take more than 10-15 minutes;
• Bad credit history is ok. Even if a person had problems with paying loans in the past, he or she can take a loan online. Moreover, microfinance companies specifically offer to take a small loan via the Internet to improve credit history. If you borrow money several times in a row and then return it in time, then the reputation will quickly become much more positive;
• Multiple repayment methods. To repay a loan, you can use almost any existing payment system. In most cases, you can repay a loan online directly in your personal account, which eliminates the need to leave your home.

In a word, for many people in need of money, the answer to the question of whether it is worth taking a loan via the Internet will be positive. Online loans have many advantages, although they also have a few disadvantages. You need to know in advance about the pitfalls of online loans, so as not to get into an unpleasant situation in the future.

Disadvantages of online loans

When considering the question of whether it is worth taking loans on the Internet, you need to be aware that such offers have quite significant disadvantages. These include:

• High interest rates. Perhaps this shortcoming is the most tangible. Most online lenders set higher interest rates than those in banks;
• Short lending terms. Online loans are usually issued for a month. Sometimes there are options with a longer period. The time limit often prevents the return of money since the borrower does not have time to fully solve his or her financial problems;
• High penalties. If you do not repay the loan on time, the company will accrue quite high penalties and fines.

All of the above must be taken into account when applying for online loans. You can take them only when you are sure that you will be able to return the money on time. Otherwise, it is better to refrain from contacting microfinance companies.

What happens if you don’t repay the loan?

Usually, a borrower is always concerned about the question of what will happen if he took a loan via the Internet and did not repay it. Unfortunately, life circumstances often develop in such a way that it can be problematic to find money to repay a debt. If you do not return the money on time, then you will be charged penalties and fines.

In addition, interest continues to accrue for each day overdue. The client will constantly receive calls from collectors, reminding them of the need to repay the debt. If the payment is delayed, then the case is transferred to a collection agency. Credit history deteriorates, and a person has problems with getting loans in the future.

How to get money online

To apply for fast online loans, you must first find a suitable microfinance organization. Now there are a huge number of such companies, they offer different conditions for cooperation. The client can choose the most advantageous offer, based on:

• loan limit;
• interest rate;
• loan terms.

Of course, you can not limit yourself to one website because no one forbids applying to several lenders at once. You can also use referral services that help potential borrowers find the most suitable loan on the net.

To get accepted, you need to fill out an application form. You will be required to provide some personal data, such as your name, birth date, SSN, government-issued ID, email address, phone number, home address, information about your employment and income. It is necessary to enter only truthful information. If a mistake is found, you will be declined for a loan.

The completed form must be sent for consideration, which lasts only a few minutes. The solution is usually displayed on the screen. It is also sent via SMS and email. If the decision is positive, then the borrower will only have to e-sign the contract and receive money for whatever needs.

When is it worth taking out an online loan?

• Your paycheck is coming soon, but you need the money now;
• Friends and acquaintances could not lend you the required amount;
• If you are in a hopeless situation, there is no place to get money, but you need it right now;
• You are in a situation where money can only be issued via the Internet.

When is it NOT worth taking out an online loan?

• You need money to repay another debt;
• If you do not meet the repayment deadlines;
• The terms of the loan do not suit you;
• You know in advance that you will not be able to repay the loan.

Ways to receive money

You can get the money transferred to your bank account, and this option is the most popular. But if this method is not suitable, then you can use any of the available ones. Most online lenders transfer money in the following ways:

• a bank account;
• an electronic wallet;
• same-day electronic funds transfer systems (Fedwire and CHIPS).

It is important to understand that the bank account, e-wallet or a funds transfer system must belong to the borrower. Otherwise, you won’t be able to get the funds.

Online loan statistics

Statistics from the credit bureaus show that over the past year the number of US residents who apply for online loans has increased by 35.5%. The average size of an Internet loan is a little more than $500. If we talk about the portrait of the borrower, then it can be both a working person and an unemployed person.

Pensioners and students often apply for online loans too The bulk of borrowers are people with low incomes. The income of most clients who contact microfinance companies is less than $700.

The final answer to the question of whether to take a fast online loan depends on the specific situation. If a person understands that he or she can repay the debt on time, then he or she can safely apply for a loan via the Internet. But you should remember what will happen if you do not pay off the loan on time. Delaying debt repayment is fraught with huge fines and a significant increase in the amount to be repaid.

Interesting facts about online loans

1. Before lending money to a borrower, the organization checks information about him or her. The credit history is stored in special databases. Such information began to be collected in the 19th century;
2. You can get a loan even if you have a bad credit history, but it is a little more difficult;
3. In Europe, the turnover in the field of online loans is more than 160 billion euros;
4. The most frequent clients who borrow money on the Internet are young people aged 25 to 38 years. This category most often needs finance for their own needs.

Conclusion

• Online loans have both positive and negative aspects;
• If there are alternative options, it is better to use them. But if there are no options, and you need money right now, then apply for a loan via the Internet, taking into account the above recommendations;
• Apply for a loan only if you are sure that you will repay it on time;
• A microfinance organization must be licensed.

Category: General

Tags: finance, money, online loans