Personal loans have become one of the go-to methods for covering different types of expenses, regardless of whether they’re planned or completely unexpected. They’re a great way to address a financial need or finance a purchase or a project.
In this guide, we’ll introduce you to online personal loans, their different types, what they’re used for, their benefits, and how to apply for one such loan online. So, without further ado, let’s dive right in.
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What Are Online Personal Loans?
Personal loans are short-term or long-term loans in which borrowers borrow a lump sum of money and repay it according to their repayment terms, either at the end of their following payday period or through recurring monthly payments.
Personal loans are characterized by two defining characteristics: they’re typically granted to individuals rather than businesses and other legal entities, and they’re flexible in terms of use; in other words, the lender imposes very few limits on their use.
The defining characteristic of online personal loans, on top of what we already mentioned, is the fact that they are obtained online. Online lenders, which also include traditional financial institutions, grant lenders the ability to complete the entire borrowing procedure online from the comfort of your home.
This means that you can go through the entire loan application process, including pre-application, application, evaluation, approval, and receiving funds, without ever entering the lender’s branch office.
Additionally, online lenders also offer extensive customer support through chat, email, and phone support. On top of that, online personal lenders may also offer both secured and unsecured types of loans, with the added benefit of convenience offered by online loan applications and approval process.
What Are Personal Loans Online Used For?
Depending on the type of loan you obtain, personal loans have a wide range of uses, including financing emergencies, large purchases, or projects you can’t afford upfront. Here’s a list of reasons why you should consider applying for a personal loan online:
- Debt consolidation: Obtaining a major, long-term installment loan would allow you to fix your finances by consolidating all your monthly payments at various interest rates into a single monthly installment at a single interest rate. This is a very reasonable approach to dealing with credit card debt, as personal loans usually have much lower interest rates compared to credit cards.
- Home improvement: Personal loans are a fantastic financing option for home improvement projects, especially if you can’t apply for a home equity line of credit (HELOC).
- Moving expenses: Long-distance moving can cost up to $7,000; securing a personal loan to pay for moving expenses is a good idea if you don’t have that amount of cash at hand. This is preferable to using up your savings and emergency funds, as those might help you set up at your new place.
- Emergency expenses: Due to their relatively quick approval times, online personal loans are a fantastic way to cover a financial emergency or unexpected expenses.
Types of Personal Loans Online
Online personal loans are split into two categories: secured and unsecured loans. Though each has its subsequent type, it’s worth noting that unsecured loans have become synonymous with personal loans due to their flexibility. You can find a comprehensive breakdown of both loan categories, with subsequent loan types below:
Secured Loans
Secured loans are usually long-term loans in which the loan amount is determined and backed by collateral; the borrower’s property, savings accounts, or valuables. Collateral implies lower risks to lenders, which provides more favorable interest rates and loan terms for borrowers.
Secured loan lenders usually rely on your credit history to determine your creditworthiness and eligibility. The presence of collateral makes the loan requirements less stringent than those for unsecured loans.
Some lenders don’t rely on your credit score to determine your eligibility for the loan, which is good if you have bad credit, but this usually implies higher interest rates and less favorable loan terms.
Secured loans include mortgages, home equity lines of credit, pawn shop loans, and car title loans, among others. They vary in repayment terms, but most of them are long-term loans with reasonable interest.
Unsecured Loans
Unlike secured loans, unsecured personal loans don’t require any collateral and don’t have such stringent requirements, but your eligibility for the loan is based on your creditworthiness, dictated by your FICO score.
The lack of collateral means generally higher interest rates that are completely based on your credit score. Borrowers with excellent credit receive the most competitive interest rates and most favorable loan terms. They also come with origination fees, fixed monthly payments, fixed interest rates, prepayment penalties, and varying annual percentage rates; the latter depends on the type of loan.
The most common type of unsecured loan is a personal installment loan, in which you borrow a lump sum and later repay it through monthly installments. Other types of unsecured loans include payday loans (very high APR, best avoided), cash advances, and student loans.
Your eligibility is determined based on your credit report, as they’re granted solely on your promise to repay the debt. With that said, there are unsecured personal loans for bad credit, like payday loans, but they usually come with exceptionally high interest.
Benefits of Online Personal Loans
Regardless of whether they’re secured or unsecured, online personal loans offer several benefits:
- Convenience: Having the ability to apply for a loan online is one of the major benefits of online personal loans. You can submit all the necessary documents and complete your loan application from the comfort of your home using your computer or smartphone.
- Ease and accessibility: Online lenders typically tend to be more accessible compared to traditional banks and financial institutions, which makes it easier to obtain an online personal loan. This is particularly beneficial to borrowers with bad credit.
- Fast processing: Most lenders feature fast application processing or pre-approvals, which means that you won’t have to wait long to know whether or not your loan application has been approved.
- Quick access to funds: Thanks to streamlined online application processes and fast approval, borrowers who are approved for the loan usually receive loan funds on the same day or the next business day. The funds are usually deposited into the borrower’s checking account. Please note that some lenders, like payday lenders, might ask for direct debit authorization so that they can withdraw the repayment fund from your bank account.
- Credit score benefits: Most online personal loan lenders will communicate your debt repayment to a credit bureau, which might boost your credit rating. This could help you secure more favorable personal loan rates and terms with the future loan.
What to Look for in Personal Loans Online?
With so many loan options available only, choosing the best one that fits your needs isn’t easy. That’s why you should consider the following factors when searching for personal loans online:
- APR ranges: Annual percentage rates run anywhere from 2% to 35% for typical loans and up to 400% for small personal loans, such as payday loans, with more favorable rates reserved for the most qualified loan applicants.
- Loan amounts: Depending on the lender and the type of loan, personal loans range from $200 to $100,000, so it’s really important to find a loan product that fits your needs perfectly.
- Loan repayment terms: Loan terms usually range from 12 to 60 months for long-term loans, and some lenders even provide longer terms than others. Choose a lender whose terms work best with your budget.
- Application requirements: Despite offering more convenient ways to apply for a loan, some online personal loan lenders might have stricter application requirements than others.
- Funding speed: If you need the money immediately, look for a lender with same-day funding.
- Reputation: Before choosing a lender, check internet reviews, and if possible, speak with friends and family who might’ve dealt with that particular lender before.
How to Apply for a Personal Loan Online
The online loan application differs from one lender to the other and depends on the type of loan you’re applying for. Applying for a personal loan online also has some universal requirements that you need to fulfill to be able to secure the loan.
This includes submitting the required documents for the lender to review. These include your state-issued ID or any document that can be used for identification, your proof of residency, proof of income that demonstrates your ability to repay the loan, personal information, and loan specific-documents, such as a qualifying title for the loan in case you’re applying for a car title loan.
After you’ve submitted your application and the lender approves it, you’ll be contacted by the company representative with the loan offer. Upon reading the loan terms and signing the contract, your loan has been officially approved, and the funds will be loaded either on the same day or the next business day.
However, this approach also implies researching different lenders and going through the application and approval process that, despite how fast they are, still consumes time. Fortunately, we offer a solution: simply fill out a loan inquiry form on our website, and we’ll share it with our lending platforms.
Upon reviewing your information, our trustworthy lending partners will contact you with a loan offer. You might also receive several offers, which would allow you to choose the best one for your financial needs.
Summary
Finding an online personal loan doesn’t have to be hard or time-consuming, and you can skip most of the online comparisons between different lenders by entrusting the process to Primo Personal Loans. We’ll connect you with reputable third-party lenders and financial institutions and bring you one step closer to obtaining your personal loan.
