Online lenders use technology to give borrowers access to personal loans with just a few swipes. You can typically apply in minutes and get money as soon as the next business day. But make sure you meet the eligibility requirements and are working with a legitimate lender before you apply.
Are online loans safe?
But like anything online, no company can ensure your information stays 100% safe. Confirm your lender has a secure website before following through with the application.
Shop online lenders and apply today
Pros and cons of borrowing a loan online
Borrowing a personal loan from an online lender can be fast, but they often come with higher rates. Make sure the benefits outweigh the costs before applying.
- Won’t impact your credit. Most online lenders offer a preapproval process that allows you to check your potential rates without lowering your credit score.
- Quick turnaround. Banks and credit unions can take days or even weeks to process your application, but many online lenders can process and fund loans within one to two business days.
- Simple repayments. Many online lenders offer automatic payments with APR discounts. You can also take advantage of other online bill pay options, as well as view your loan schedule and terms on the lender’s website or app.
- Credit may not be everything. If you have the income to make repayments but don’t have the best credit, an online lender may still consider you. Just keep an eye on the APR — they usually come with higher rates.
- Harder to qualify if you’re self-employed. Most lenders don’t accept borrowers who are self-employed. And if they do, you’ll have to submit extra paperwork to prove you have a steady source of income.
- Higher rates. Online lenders tend to have higher rates than banks or credit unions, especially if you have good to excellent credit.
Online loans vs. bank loans vs. short-term loans
Although many lenders frequently advertise online personal loans, there’s a big difference in the price you pay and turnaround when you borrow from a bank, online lender or short-term lender.
How do I compare online loans?
While there are no hard-and-fast rules for comparing online lenders, these points can help guide you toward the best option for your financial situation.
- Eligibility requirements. You’ll need to meet minimum credit, income and debt-to-income (DTI) ratio requirements to qualify. And some online lenders only work with residents of certain states.
- APRs. Don’t just consider the minimum APR when comparing online lenders. Check the maximum, too. This way, you’ll be able to avoid paying high APRs if you don’t qualify for the lowest rates.
- Loan amounts. Minimum and maximum loan amounts vary by lender, so make sure it offers the amount of financing you need before applying.
- Fees. Not every lender charges fees. Try to pick a lender that has a low origination fee or minimal late fees so you can avoid paying extra on your loan.
- Required documents. Each online lender requires different documents to finalize your application. If you’re looking for a fast process, go with one that requires the bare minimum.
How can I use an online loan?
Online loans are personal loans — which means you can use them for just about any expense, including:
How much do online loans cost?
The cost of your loan depends on three factors:
- Loan amount. The larger your loan, the more you’ll have to repay. Because all lenders require you to pay back principal plus interest, a $10,000 loan will cost more to pay back than a $1,000 loan — no matter how low your APR.
- Interest rate. Online lenders typically have interest rates ranging from 5% to 36%. The higher your interest rate, the more you’ll have to pay back. For example, if you have a 10% interest rate, you’ll be paying back $10 per every $100 you borrow.
- Fees. Origination, late and nonsufficient funds (NSF) fees will all impact the cost of your loan. To find the best option, try to pick a lender that limits the fees it charges.
Use our personal loan calculator to compare costs between online loans.
How do I apply for an online loan?
Follow these steps to find a good deal on an online personal loan:
- Check the lender’s eligibility requirements. Online lenders will consider your credit score, income and state of residence — among other factors — to determine if you qualify.
- Apply for preapproval. Many lenders allow you to fill out a quick form to check what rates and terms you might qualify for without affecting your credit.
- Compare offers between lenders. Once you’ve applied for preapproval from multiple lenders, compare your options. Consider the APR, loan term and total cost when making your decision.
- Finalize your loan application. If you’ve found a good deal, submit any necessary documentation your lender needs to process your application.
Some lenders might give you a decision immediately, while others might take one to two business days to get back to you.
An online loan is often much more convenient than visiting your local bank or credit union. But keep an eye out — some short-term lenders advertise their products as personal loans to trick borrowers into high-cost financing. Learn more about the ins and outs of personal loans and compare other lenders with our guide.
Frequently asked questions
Yes. Most legit lenders will check your credit when you submit a full application. However, when you apply for preapproval, most lenders only perform a soft pull on your credit — which won’t affect your score.
It depends. Most lenders don’t accept cosigners, but they do accept coapplicants. Our guide to borrowing with a cosigner can help you navigate your options.
The easiest way is to sign up for autopay — where repayments are automatically withdrawn from your bank account on the due date. Many lenders offer a 0.25% APR discount if you choose this option. You can also make manual repayments from a bank account, and in some cases might even be able to pay by check or debit card.
You can in some cases, though the lowest rates typically go to borrowers with good credit. Borrowers with bad credit may have better luck using a personal loan connection service or borrowing with a coapplicant.
Kellye Guinan is a writer and editor with Finder and has years of experience in academic writing and research. Between her passion for books and her love of language, she works on creating stories and volunteering her time on worthy causes. She lives in the woods and likes to find new bug friends in between reading just a little too much nonfiction.
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