More consumers are turning to online solutions when borrowing money. While there’s still a place for in-person loans—and plenty of benefits to go with them—online loans offer convenience and speed.
Now that many lenders offer online loans, borrowers have more options than ever. No matter your credit profile and what you need in a loan, you can likely find a safe, secure, and solid online solution that works.
To help you decide if online financial solutions are right for you, let’s discuss how they differ from in-person loans and the pros and cons of each option.
How Do Online Personal Loan Solutions Work?
Online personal loans aren’t all that different from those you’d borrow at your local bank or credit union.
Personal loans are usually unsecured, meaning they don’t require collateral like mortgages and auto loans. As a result, personal loans can be used for nearly any purpose. They’re a popular solution for debt consolidation, home improvements, large purchases, and more.
An online personal loan is one you borrow without visiting a physical branch. You can get an online loan from either an online-only lender or a traditional lender offering online loans.
Rather than going to a physical branch to speak with a loan officer and sign your documents, you can do everything online, from the application to the loan funding.
Online loans have many of the same requirements as traditional personal loans, including credit score and income requirements. You’ll still need to consent to a credit check and provide documents to verify your employment and income. Additionally, online loans have similar repayment terms and loan fees, including origination and late payment fees.
Start Your Search for Your Financial Solution
Finding the right financial solution will save you money. The best way to know if you’re getting a competitive loan rate is to compare offers from competing lenders like those below.
Compare Online and In-Person Personal Loans
Online and in-person loans are excellent options for someone looking for a personal loan. They have some critical similarities but a few key differences.
Let’s look at some similarities and differences between these loan types.
How Are Online Financial Solutions Different?
Online financial situations, including personal loans, offer many of the same features and benefits as traditional in-person loans.
However, a few noteworthy features of these loans stand out. Here are a handful of ways that online loans are different from alternatives:
Online application process
When you apply for an online personal loan, you can go through the entire application and approval process without speaking to someone.
Compare that with traditional in-person loans, where you must visit a branch to complete your application and get approved.
Loan options
The number of online loans available makes it easy for lenders to specialize, creating a greater variety of loan options. For example, some lenders offer relatively small loans, while others offer up to $100,000.
Some lenders require good credit, while others lend to borrowers with poor credit. No matter your situation, there’s a good chance you can find a loan to accommodate it.
Prequalification
Many online lenders allow borrowers to prequalify for a loan. While this isn’t the same as being approved, it helps borrowers shop around for rates and determine if they will get approved without affecting their credit score.
Prequalification allows borrowers to find the best rates because they can prequalify with multiple lenders relatively quickly and with no risks or downsides.
Faster loan funding
Traditional loan funding can take several business days or more.
It’s not uncommon to wait upwards of a week for your loan to be approved and funded. However, with online personal loans, funding often moves much faster.
Many online lenders boast same-day or next-day loan funding, assuming they can approve your application quickly.
Interest and fees
While online loans often charge interest and fees, just like traditional in-person loans, there are some differences.
First, because online lenders have lower overhead, they’re usually able to charge lower interest rates than brick-and-mortar banks.
Additionally, it’s possible to find online loans that don’t come with traditional fees, such as origination and late payment fees.
No in-person customer support
Another key feature of online personal loans, and one that some consumers may grapple with, is the absence of in-person customer support throughout the loan process.
If you run into issues, there’s no loan officer there to guide you through them in person, though many online lenders have agents that can help via phone, email, and chat.
When an Online Loan Makes Sense
Online loans are an excellent option if you want convenience above all else.
You can apply for an online loan from the comfort of your home via phone or computer. You may have your loan funds within a day or two, depending on your financial situation.
Additionally, because there are so many online lenders, finding a lender that fits your needs may be easier. For example, many online lenders have flexible credit requirements, allowing borrowers with fair or even poor credit to qualify for loans.
Pros and Cons of Applying Online for Personal Loans
Pros
- Fast and easy application process
- Easier to shop around and compare loan offers
- Faster loan funding than traditional loans
- More flexible credit requirements
Cons
- No existing relationship with the lender
- No hands-on customer support
- Increased risk of fraud and scams
When an In-Person Loan Makes Sense
An in-person loan may be a better fit if face-to-face assistance is essential to you.
When you work with a traditional bank or credit union, you can sit down with a loan officer and have them help you complete your application. Additionally, if you have an existing relationship with a lender, you may have access to more hands-on support or member discounts and perks.
In-person loans may also be a good fit if you aren’t comfortable using technology and aren’t confident in your ability to complete the application yourself.
Pros
- Hands-on customer service
- You may be able to work with your current bank or credit union
- May offer access to existing member perks
- Ideal for borrowers uncomfortable with technology
Cons
- Requires visiting a branch in person
- More challenging to shop around for the best rates
- Loan funding and approval may take longer
Our easy and efficient loan matching process helps get money in the hands of borrowers faster and with less hassle.
Is Applying for a Personal Loan Online Safe?
Both traditional banks and online lenders use extensive security measures to keep their consumers’ money and personal information safe.
Generally speaking, applying for an online loan or another financial solution is perfectly safe. However, there is the risk of fraud and scams with any financial endeavor, so there are a few factors to consider.
- Before borrowing money from any lender, ensure the company is legitimate. You can read online reviews from past customers or look the company up to ensure it is licensed to do business in your state.
- Consider what steps the company takes to protect your information. A reputable company will be happy to provide information about its security measures, and it may even have a page on its website disclosing what precautions it has in place.
- Keep in mind that even legitimate lenders can be predatory. It’s essential to read the fine print of any loan offer and note the interest rates and fees. Most reputable lenders don’t charge more than 36% interest on personal loans. If a lender charges a far higher interest rate or costly fees, it could signify a predatory loan.
Frequently Asked Questions
For most online loans, you can receive your money in just a few business days. Many online lenders even offer same-day or next-day funding on personal loans. However, getting your money may take longer if your application has an issue and the lender needs additional information.
In most cases, the money from an online loan is deposited directly into your bank account. You’ll be asked to provide your bank information when applying for the loan. If you’re applying for a personal loan for debt consolidation, some lenders will send the money directly to your existing creditors to pay off your loans or credit card balances.
Applying for an online loan from a reputable lender is just as safe as a traditional bank loan. However, some scams involve illegitimate lenders or lenders offering expensive, predatory loans. You can avoid these scams by carefully vetting any lender from which you’re considering getting a loan.
