According to TransUnion estimates, roughly 13.7M consumers had a personal loan balance last year alone. Personal loans are general purpose loans that can be used for purchasing a vehicle, financing a holiday or house renovations. Personal loans can be used at one’s discretion, but sometimes some lenders may restrict what you do with the money.
Until recently, the only way you could acquire a personal loan was to visit your local bank and apply for one. However, currently, people are considering online loans which are offered by online vendors.
These loans are quite easy to acquire as you can get them from the comfort of your house. Personal loans are usually less flexible as compared to credit cards because they fail to offer additional benefits such as rewards, travel benefits, and purchase protection.
Here are some things you should know before acquiring your personal loans online:
The Pros Of Online Lenders
- Know your lender – One may be hesitant to provide their financial information to an online lender due to security reasons, but often we tend to forget that even the offline vendors have to upload their data in an online database. According to bingoloans.co.uk, a top provider of short term loans in the UK, you should strive to get more information about online lenders by reading their online reviews and compare their rates before settling for one.
- Convenience – Online vendors process loans entirely online. Both offline and online vendors offer you an opportunity to submit the required documents like your social security card online. However, unlike online lenders, some offline lenders may require you visit their branches to sign some documents. Online lenders, on the other hand, handle the entire loan application process online.
- Avoid sales pitches – Ever tried borrowing a loan from a bank? If yes, then you know the sales pitches that you’re likely to encounter. Banks or credit unions will try to sell you fixed accounts or other products to entice you, which is not the case with online vendors. The main focus of online vendors is purely lending.
- No risk to personal property – The good thing about online loans is that your private property is not at risk in case you fail to make payments. Most offline loans will require a particular property as collateral as an exchange for acquiring the loan. So with online lenders, you do not have to worry about losing your car in case paying becomes difficult. Of course, this depends on the personal loan terms provided by the lender.
The Cons Of Online Lenders
- Interest rates and other fees – Some online lenders may charge fees on every transaction, or everytime a loan is approved. An example is Prosper which charges a 5% origination fee for every amount borrowed. The charges are, however, dependent on your credit ratings. The online lenders charge higher interest rates because the risks involved are more than those of secured loans where a property is put as collateral.
- Loan amounts may be smaller – Creditors generate profits from the interest they charge on loans, and thus they undergo losses if the loans are not paid. This is why most online lenders tend to lend less money especially if your credit score is low to mitigate these kinds of risks.
- Scammers pose a considerable risk – One of the significant drawbacks of online borrowing is the presence of many scammers that con people. So, before you give out your personal information, ensure that the lender is legitimate. Most reputable online lenders usually display a badge or icon to show their security certification.
Personal online loans are a good option in most instances as they can come in handy in case of an emergency, and obtaining them is easy. While there are a few cons to watch out for, the truth is, more people will continue opting for them.