For people who don’t like all the hassle of going to an in-store lender, online loans can be a great solution. You can finish the whole application process through the internet, from the comfort of your home.
There are several different kinds of online loans. While the application can vary depending on the lender you choose, it is usually quick and straightforward, which is why most people prefer online loans.
How Do Online Loans Work?
Applying for an online loan is a simple process. Finding a suitable online lender is what takes up most of your time. After that, you fill out an application on a lender’s website, which usually takes a few minutes. Once you apply, the lender will generally take some time to check your credit score and evaluate your creditworthiness.
CreditNinja is a reliable online lender, and if you need to take out a loan, you can do it through filling an application on our website.
Most of today’s lenders perform what is called a soft credit check, which is why they can approve your application within minutes. That is a lot quicker compared to traditional bank loan applications that can take days or even weeks.
Based on your soft credit pull, and/or a hard credit pull, along with some other factors such as income, lenders decide whether they’ll approve your application or not.
After being approved, a lender will deposit funds directly into your bank account. With CreditNinja, you have several options to pay back what you borrowed depending on the type of loan and your repayment plan.
Some lenders will automatically withdraw money from your account each month, while with others you will have to make payments yourself.
How Are Online Loans Different Than Traditional Loans?
You can get everything from an online loan that you would get from a physical lender. However, since the whole process of online loans is done through the internet, and the funds are deposited directly to your bank account, online loans typically feel more convenient than traditional loans.
Online loans are generally faster than traditional loans. Lenders can approve your application within minutes, while this process can last for days or even weeks with conventional lenders. On top of this, some online loans come with lower interest rates because lenders don’t have the costs of maintaining brick and mortar locations.
Another advantage of online loans is that they are safer. You don’t have to deal with paper checks or cash, so there is a smaller chance of theft, misplacing, or losing your borrowed funds.
Different Types of Online Loans
There are three main types of online loans: payday, title, and personal installment loans. Not all online lenders offer all these loans, so make sure to inform yourself about which type suits you best, and to find a lender with the best terms.
Payday loans are used to cover some unexpected expenses and should only be used as a one-time fix. They come with higher interest rates and a short term of usually two weeks.
The average cost of payday loans is $15 for every $100 borrowed over two weeks. That leads to an annual percentage rate (APR) of almost 400%.
If you can’t pay your loan at the end of the term, a lender usually gives you an option to roll over your debt. That essentially means that you would only have to pay for the interest of the previous term, and would get another two weeks to cover your debt. However, over that period, you would get another round of fees, which leads to debt accumulation.
Given the higher interest rates, shorter repayment terms, and ability to roll over your debt, it is important to make sure you are in a position to pay back your payday loans without accumulating interest.
Title loans also come with shorter terms, higher interest rates, and an option to roll over your debt. However, these loans are secured by your motor vehicle, which acts as collateral if you can’t repay your loan.
Because title loans are secured by the value of your vehicle, lenders can offer a larger amount than with payday loans. It is still important to have a pre-existing plan in place to pay off your loans before taking them out.
Personal Installment Loans
Personal installment loans are typically considered the safest of all online loans. They are meant to be repaid in a series of fixed monthly payments over an extended period, instead of paying everything back at once in just two weeks.
Having regular monthly payments make these loans more digestible. They also typically come with lower interest rates and overall costs than equivalent loans from a brick and mortar lender. If you are thinking about taking out a personal installment loan, CreditNinja offers services tailored to your specific needs.