Gone are the days when you have to dress or suit up to convince a bank that you're decent enough to pass for a loan. Today, applying for a loan is made a lot easier and can be done even while you're wearing your pajamas. Thanks to the brilliance of the internet, online loans were born.
Just browse the web and countless online short-term loans will flash before your eyes. Lending institutions that offer short-term online loans such as payday loans and cash loans understand the urgency of the situation their potential customers are in so they are available 24/7 to give a helping hand the faster and more convenient way.
But before you get too excited about getting a loan, it is crucial to know what you're getting into. While there are great benefits, there are also risks you should keep in mind to save you from huge, financial blunders.
The Perks of Short-term Online Loans
Higher chance of getting approved
When you borrow from traditional lenders, you have to pass their demanding criteria in order to get a loan. Online lenders keep their standards low, which means there's a greater chance for your application to get approved. You just have to provide essential information implying you are of legal age, you have a stable source of income, and you have an active bank account.
Good credit score is preferred but they won't condemn you if your rating is low. Some lenders accept consumers with poor credit score and offer them other options based on their score, income, and needs.
Less hassle on your end
Forget the pile of paperwork you have to fill up in traditional banks as well as the line you have to endure. Applying for a loan online saves you from the hassles of these tiring and time-eating procedures. You may finish your application anytime and anywhere, whether you're having your lunch at work or lying on your bed.
Online lenders are highly accessible and the applications and procedures are made faster and less complex. You just have to fill up an online form which includes information such as the amount needed, purpose of the loan, personal and contact details, and employment details. Then, your information will be verified by the lender and you're done.
Round the clock service
Online loans are perfect for emergency situations which spare no mercy to consumers with regards to time and place. Unlike traditional lending in banks and other financial institutions, you don't have to wait any longer before you can get hold of your borrowed money. Most short-term lenders online send you money within the day, or even in an hour or less.
Online lenders understand your need for immediate financial aid and they aim to lessen your worries. Aside from their fast service, you are assured that the terms of their loans, as well as the schedules, are straightforward and easy to understand.
The Downfalls of Short-term Online Loans
Higher interest rates and fees
With great privilege comes great costs. Short-term online loans are popular for their high interest rates. Aside from being an exchange for the convenience, the interest rates also compensate for the risk the consumer puts on the lender. The higher the risk, the higher the interest rates.
The rates also vary depending on your credit score: the lower your credit score, the higher the risk, and therefore, the higher the interest rates may be. Fees such as late repayment fees should also be kept in mind since they can double or triple the amount you borrowed.
This is why professionals would suggest not to get these types of loans unless the need is urgent and waiting for days, weeks, or months is not an option.
Shorter repayment period
In banks, you are given a repayment plan designed to suit your budget. These plans can last for a few months or years. When you for an online loan, the expected repayment period range from two weeks to a month, which can serve as a disadvantage if you're anticipated cash won't be enough to cover the debt and other expenses.
The longer the term, the higher the costs. Not to mention those repayment charges that come with late fees. With this, it is highly advised to go for lenders who will thoroughly analyze your application and will give you options that would best suit your income and ability to pay off the loan.
Extra efforts in research
There are popular banks and financial institutions who don't need to introduce themselves to you. Due to their outstanding credentials, you are assured of an exceptional service from them just by hearing their names. Since online lending is new in the scene, it will take extra time and patience in choosing the right lender for you.
Aside from the fact that you are going to disclose your personal information to a virtual entity, most lending services online are run by private companies who want nothing but profit. With this, you should take your time shopping around the web, looking for various lenders, comparing their options, and reading reviews about the company. You can also seek recommendations from your family and friends with regards to trustworthy lenders they have already made transactions with.