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While most people are in doubt, I believe online lenders are just as reliable as any other financial institution. They come in handy when there seem no one else around when you need some extra cash. Online loans are a saviour in times of unforeseen urgencies especially when your credit rating is not so impressive.
Why take out Online Loans?
Majority of banks and other traditional lenders are different. They may feature an online application, but it will still take a while to get a feedback from them. In most cases, your loan application would go through several officers to review it first. And, you might even need to visit a branch in-person.
Traditional loans and credit cards take a long while to process, but with online loans, approvals are almost instant. No lengthy forms to fill out, no piles of documents to send, and no waiting for several days. Online lenders give feedback instantly. This is beneficial because if you don’t get an approval, you can seek elsewhere immediately.
You can be assured of the speedy process because online loan lenders must maintain quick services in order for them to stay on top of the game. The number of online loans in the market is growing rapidly over the recent years.
The thing that makes online loans attractive is the convenience they provide to consumers. Anyone can apply for a loan remotely at any time. All that one needs is a computer or a smartphone or tablet, and the internet. With the internet and the lender’s technology, you don’t need to get an appointment or wait in line at a local lender’s branch to apply and process a loan.
You can easily qualify for online loans. Most online loans do not do hard credit checks. This way, your credit score will not be affected further more. Even if you have a bad credit or no credit at all, you can still qualify for online loans. What online loan lenders want to see is for you to have a stable income in which you can still afford to pay the loan.
Banks, traditional nonbank lenders, and credit unions have become a bit picky over the years. It’s easy to get a loan from them if you’ve got an excellent credit record, but if you’re still building credit or you’ve been through some hard times lately, a low credit score will do you no good with these conventional creditors.
Online lenders are more likely to approve loans requested by people with lower credit scores. They use alternative information to evaluate your creditworthiness instead of running a credit check. Alternative information include your recent utility payments, sources of income, employment record, and even information from your social media.
Online loans are typically unsecured type of credit, meaning you don’t have to put up an asset as collateral to help get your loan application approved. As unsecured loans, online loans are safer than borrowing against your personal assets. If you fail to repay an unsecured loan, your credit scores may drop, but you won’t have any of your assets repossessed and you won’t have to worry about any foreclosure.
Fast and Simple Comparison
Searching for the best loan can be time-consuming and challenging, but it’s easy to compare loans online. Online loan lenders offer prequalification, which takes only a few minutes. Comparison sites allow borrowers to see loan offers from multiple lenders after filling out a single application form. You can also use the lender’s loan calculators, which are found on their website, to see how your monthly repayments would look like with the amount of money you intend to borrow.
On the flipside, however…
As with any type of credit, you may encounter both benefits and drawback of online loans.
Not the Cheapest
Yes you read that right. Most online loans have lower interest rates because they can save on the cost of not having an actual space or office, but they’re not really the cheapest in the market. Online loans vary according to the lender’s terms and conditions, so you may get different rates from each one. It’s imperative to compare rates from multiple lenders before you take out any online loans.
You will notice that online loans have higher cost than traditional loans. You should always check out the fees and rates that the lender will charge you firsthand. Make sure that the cost could fit into your monthly budget without compromising other regular expenses. Some lenders may also offer the option of early repayment without charging any additional fee. A great loan feature that you should check out, as it will help you save on fees. However, some may charge an early settlement fee plus more interest rate if you settle your loan early.
Loan Predators and Scammers
Reputable online lenders compete alongside predatory lenders or loan sharks and scammers online. Reputable lenders check your credit and your ability to repay the loan, with an APR that top out at 36%. Loan sharks and fraudulent lenders advertise that they don’t run credit checks, so be extra cautious with them. You pay the cost of this added risk, in the form of interest rates that could go as high as 700%.
Before you provide your personal information, always ensure that the lender’s site is legitimate and secure. A secured site means that the URL starts with “https” instead of “http.” You should see a little lock symbol beside the URL as well. Majority of reputable lenders also have a badge or icon that displays their security certification.
A reputable lender checks your credit, if not, asks other important personal information relevant to your finances because this is mandated by law. Many online lenders consider additional factors, such as your income and employment history or profession, but in relation to your credit score and credit history. If an online lender says they do not check your credit at all, look into this deeper, but consider it a red flag.
305.9% APR. £400 borrowed for 90 days.
Total amount repayable is £561.92 in 3 monthly instalments of £187.31.
Interest charged is £161.92, interest rate 161.9% (variable)
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Rates from 45.3% APR to 1575% APR – we provide a no obligation quote, your APR will be based on your personal circumstances