How to Find the Right Online Personal Loan for You

Everything is online these days—including personal loans. Online lenders make it easy to compare rates and terms and find the right online personal loan for your situation.

Personal loans were the fastest-growing category of consumer debt in 2019, according to a survey from J.D. Power—and the internet has made the loan application and lending process easier than ever.

In all, 40% of personal loan customers in the survey applied entirely online, and those customers had the highest overall satisfaction. They were also more likely to indicate that they understood the entire application process. If you’re looking for a fast, easy, and understandable loan application an online personal loan could be right for you. But before you act, it’s important to know exactly how these loans work, what the advantages are, and how to apply for one.

• What is an online personal loan?
• Secured vs. Unsecured Loans
• Benefits of Online Personal Loans
• How to Find the Right Online Personal Loan
• Comparison Shop for Loans

What Is an Online Personal Loan?

An online personal loan is a personal loan that you can get online.

• A personal loan is an installment loan that you can take out for any number of personal reasons. The loan structure is similar to a mortgage. That is, the lender advances you money that you pay back with interest over a predetermined period of time.
• An online loan is the same as other loans, except the process takes place entirely online. This often allows digital lenders to streamline the applications. Online loans can deliver convenience and a high-quality experience.

One of the primary benefits of online personal loans is their versatility. You can take out a personal loan to meet emergency expenses, open a small business, consolidate debt, and more.

Personal loans in general—including online personal loans—are increasingly popular. According to the US Chamber of Commerce, 19.1 million Americans had an unsecured personal loan at the start of 2019. The total value of those loans was $143 billion, which was nearly double the $72 billion seen in 2015.

The flexibility that a personal loan provides has become all the more valuable during the COVID-19 pandemic. Millions have experienced economic hardships that may have made it difficult to pay bills or meet other expenses. An online personal loan could help plug budget gaps, and the streamlined application process allows consumers to get their money more quickly. Some respondents in the J.D. Power survey reported receiving their funds in as little as two days.

Secured vs. Unsecured Loans

When talking about the concept of online personal loans, it’s important to touch on the differences between secured and unsecured loans:

• Secured loans are those where collateral is put up to secure the loan. For instance, a home would act as collateral in a mortgage or home equity line of credit (HELOC). A car might be put up as collateral for an auto loan. Lenders of secured loans can repossess collateral if the loan is not repaid.
• Unsecured loans are made without any collateral or asset backing the debt. A bank, credit union, or other financial institution often approves the loan based on creditworthiness of the borrower, their credit history, and their perceived ability to repay. Lenders can’t automatically seize your assets, as they aren’t tied to the loan. However, the lender may still put your account into collections and take legal action to recoup the debt.

Benefits of Online Personal Loans

There are many advantages to online personal loans. You can make the best use of your loan if you know the benefits.

Competitive Terms

Rates and terms will vary depending on your credit score and other factors, but online personal loans can offer you competitive rates. Because they have fewer overhead costs, they can pass those savings onto the consumer by offering lower rates than brick-and-mortar bank lenders.

Fast Approval

Online lenders typically offer pre-qualification that doesn’t affect your credit—and have fast approval times. When you need money in a pinch, an online personal loan could offer you the quickest pathway to financial support.

Convenient Process

Online personal loans are popular because the experience tends to be more efficient and user-friendly than the traditional loan process. You can easily compare multiple lenders at the same time and apply whenever you’re ready.

How to Find the Right Online Personal Loan

In general, the main steps to getting an online person loan are the same as applying for a personal loan with a bank:

1. Submit basic personal information, including name, birthday, Social Security number, and home address.
2. Provide financial and employment records, like proof of assets, bank statements, or pay stubs.
3. Review the loan options available to you.
4. View the rate you are quoted, which is in part based on your credit score.
5. Read the disclosure about fees and penalties.
6. Complete your application.

Beyond that, there are some other pointers to keep in mind. Doing so will help you find the most suitable loan for your needs:

• Have an idea in mind for what you’ll use the loan for. This will enable you to pinpoint the amount you need to borrow. If you leave it open, you may take out more than you need—and thus pay more interest.
• Research the application process for various digital lenders. Overall, 91% of respondents in the J.D. Power survey completely understood the process for their online personal loan. The process may be a little different from the above, so check on the specifics of any lender you consider working with.
• Compare terms. Terms will vary from lender to lender, such as the loan term, the repayment period, the interest rate, and other fees. Having this data will help you better compare available options.
• Consider a cosigner. Some online lenders may have increased qualification criteria for credit score and debt-to-income ratio. You may want to consider finding a cosigner if a poor credit score or high DTI leads to higher quoted interest rates.

Comparison Shop for Loans with Help from Credit.com

Ready to take the next steps toward finding an online personal loan? Compare rates and terms to find the right online personal loan for you with our help.

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