What is an Online Loan?
An online loan is a type of personal or home loan that is processed and approved entirely online. The process may require the borrower to submit documents, like a photo ID or pay stub, and to meet lender requirements. Online lenders typically offer competitive rates and can be used by people with less-than-perfect credit.
Online loans are available through a variety of lenders, including credit unions, banks, and community programs. Some lenders specialize in specific types of loans, such as student loans or mortgages. Others, such as Lending Club and Prosper, are peer-to-peer lending platforms that connect borrowers with investors who fund their loans. Online loan applications can be submitted and processed in the same manner as traditional loans, with borrowers typically receiving funds within a few business days of being approved.
Understanding the Benefits of Online Loan Services
When considering an online loan, borrowers need to do their research. Many online lenders are reputable and provide competitive terms, while others may be predatory or charge high-interest rates. Borrowers should always read the fine print and consider alternatives, such as credit cards, that may have more favorable terms.
The impact of an online loan on a borrower’s credit score depends on the lender, how long it takes to repay the loan and the borrower’s ability to make payments. Repaying the loan on time can help improve a credit score, but failing to pay back the loan may damage it. In addition, borrowers should avoid paying off their online loan with other forms of debt, such as credit card balance transfers.
