Online banking has changed our lives for the better by providing us with on the go access to our bank accounts. Online loans however have been slow on the uptake perhaps because people are not so comfortable to share their details with online lenders who are not reputable banks or institutions. Nevertheless online loans offer a convenient way of getting a quick loan according to the borrowers needs.
There are websites which offer comparison between different online lenders, on such sites you can compare:
- Interest, application fee and other charges from different lenders,
- Application and turnaround time. This depends on your need, most online lenders give you access to funds the same day, some take up a day or two.
- Eligibility criteria, depends on the requirement of the lender, take your time to search for the lender which best suits your needs.
Online loans offer the ease and convenience of getting funds quickly, with little or no paperwork, without involving any bank. Moreover they are unsecure loans, which means that there is no collateral and in case the borrower defaults there will be no foreclosure of property or confiscation of collateral. However there are a few things to be careful of.
Since the loan is for the short term, expect high interest rates. Furthermore, do your research before choosing a lender as there are predatory lenders in the online loans market as well, they lure borrowers with lucrative terms but their plan is to trap the borrower with rollover facilities where the borrower ends up paying more than the initial amount. Try to avoid very short term loans like payday loans, which have a payment period of 14 days. Look for loans with a longer period of payment so you can have some breathing space between the repayments.
Most lenders will require your personal details like your name, date of birth, social security number, financial details and your bank details to transfer the funds.
It is easy to secure an online loan if you are employed and have a bank account, it is best to use them in case of a pressing emergency. Many people opt for online loans to get out of financial tight spots. It must be kept in mind that although convenient, online loans do not function as a financial supplement. If you default on payment, then you will have to face a high penalty and other charges.
Things to keep in mind before taking out an online loan.
Keep them for emergencies.
What defines an emergency you may ask? Good question. You must ask yourself, is it really an emergency or you can afford to let it pass. It depends on the situation or circumstances. For example a health related matter will surely be an emergency but fixing the body work on your car may not be an emergency, it is an expense which you can put off for a time.
Borrow what you need and not more.
The lenders will offer lucrative terms and deals, they will want you to sign up for a bigger amount and they will certainly want you to hang around and come back for more. Do not fall into this trap; estimate your need prior to agreeing to the terms and only take out the amount of loan which you need to meet your emergency. The higher the loan, the higher the stake and the higher will be the risk of not being able to pay and becoming trapped in a vicious spiral.
Do not use it for leisure spending.
It can be tempting for sure, when there is a new phone in the market and you don`t yet have the savings to buy it, it can be very tempting to opt for a quick online loan and meet your need. But what if a real emergency comes up? While these are hard choices, one must think rationally and plan their expenses accordingly.
Online loans are a quick and convenient way to get some funds but make sure to carry out proper research and choose a safe and reputable lender. Do not get yourself trapped in a loan with unreasonable terms and use these loans for their intended purpose. Follow these guidelines and you shall remain safe from many pitfalls associated with online loans.