Getting a loan can be a tedious task, especially if you’re getting it from a bank. With the amount of paperwork required, specific criteria and processing times, it’s not easy for just about anyone to get a loan. So, if you’re in dire need of some cash, there are other options you can seek such as online loans. Before you resort to this alternative, here are the advantages and disadvantages of taking out an online loan:
Credit history isn’t important
Your credit history will not be one of the criteria that will affect whether or not you are eligible for a loan. On the contrary, receiving bad credit loans will still be possible if you have a bad credit history. These loans are offered to people who find it difficult to borrow from a bank as they determine your likelihood of repaying the loan and sticking to payment deadlines based on your credit history. However, with online loans, the lenders become more sympathetic and are willing to overlook your history, but they do charge higher interest rates in order to provide you with this service.
Online loans are a lot faster
When emergencies occur, you need to have enough money to cover certain costs in a timely manner. With banks, the processing period is far longer as they need to verify all the documents you present and this can take time. However, with online loans, one of the advantages you’ll be benefitting from is the speed of the entire process and how fast you’ll not only get a response, but be able to get the cash you require to deal with the emergency at hand as fast as possible.
Easy comparison between loans
One of the advantages of online loans is that they offer the possibility of comparing various loan types and deals at the same time. That way, you can compare between different options that each lender has and not only choose the one that suits your needs best, but also guarantee that you’re getting the best deal in terms of interest payments and repayment options. Since it is online too, you have the entire internet at the tip of your fingers where you can search different lenders even and choose the one you feel offers the best terms.
While online interest loans are a lot easier to get and have quite a few benefits, they also come with their share of disadvantages. So, be sure to familiarize yourself with these drawbacks before you apply for an online loan:
High-interest rates
Because lenders offer the opportunity for pretty much anyone to get a loan, even if they have bad credit, the interest rate they charge is quite high. This means that it would be a lot cheaper for you to get a loan from the bank if you have a good credit history and aren’t in a rush. However, if that is not the case, then with some research, you could get a good deal with an online loan that will be suitable for your needs.
Short repayment plans
One of the other terms that most online lenders offer is short repayment terms. That means that while you’ll be getting your loan quite quickly in comparison to banks, you will also need to repay the amount over a shorter period. In order to be able to go through with this option, you need to have a thorough plan of how you will be repaying the loan and make sure you’ll be able to stick to it taking into account the high-interest rates.
Hidden fees
While the interest rates are something quite visible in the terms and conditions of taking a loan, there can also be other hidden fees that you need to take into consideration and that you might not be aware of in the first place. These fees include application fees, opening fees, closing fees, underwriting fees as well as a few others. These fees can be quite high, making the cost of taking out a loan increase in comparison to the money you’re actually borrowing. It is important to take all these aspects into consideration and make a proper calculation in order to see whether the loan terms will still be suitable for you.
Depending on the reason you’re looking to borrow money and how fast you need it, online loans might be the best possible solution. However, it is necessary to be aware of all the costs you’ll be paying back and make a detailed plan in order to fully understand not only how you’ll be repaying the loan, but if you’ll be able to afford the high-interest rates and fees.