What are Online Loans?

What are Online Loans?

You may have heard of online loans and wondered what they are. It might sound like they are any loan that you can apply for online. However, they are not quite so straightforward as this. It is good to know exactly what it means and then you will know whether they are a suitable loan type for you.

What is it? – An online loan is a payday loan which you apply for online. This makes the application really easy as you do not have to fill out a paper form. This could cause delay in posting it and also is something which many people do not like doing. Filling in an online application for is not only easy, but it is also quick and online lenders make them as simple as possible.

How does it work? – once you apply for the loan, there will be very little time until you get the money that you need. Often online lenders will be able to get the money to you with a few hours of your completing the application form. This will depend on the lender that you choose though, so if you do need it really urgently then check first. Some may even be able to lend money to you outside of normal working hours such as at weekends and during evenings. The money will het put into your bank account so it will be there for you to spend, transfer or draw out as needed.

How do I repay? – the repayment of an online loan tends to be in one lump sum. This is usually repaid on the day that you get paid. Often the lender will set up a direct debit for this day so that the money goes out automatically. This not only means that you are unlikely to forget to repay but it also means that are more likely to have a large amount of money in the account. Usually, when we have just been paid, we have a lot of money available. 

How much does it cost? – loans all have different charges and this will depend on the lender as well as the type of loan. An online loan will often have two sets of charges. You will be charged interest and administration fees normally. To find out how much you get charged, it could therefore be complex to calculate. However, it is possible to find out in different ways. You may find that some online lenders will have a calculator on their website which will allow you to work out how much you will be charged. If you cannot find one or are not sure how to use it, you will be able to contact their customer services department who will work it out for you. If you miss the repayment, because you do not have enough money to cover it, then you will get additional charges and these will again differ between lenders.

Who is it for? – you may wonder whether this type of loan is for you. The loans were originally set up to help certain types of people, but there are no rules about who can take them out. Your credit record is not used to decide whether you will be lent money to and this means that even if you have been turned down for other loans, you may still be successful in getting this one. It was set up because there were no options for those with a poor credit record to borrow money. However, it is not necessary to have a poor credit record to borrow using this type of loan. The loans are organised quickly, which means that it could be the case that those who need money in an emergency might choose this type of loan so that they can get the money quickly, even if they have a good credit record.  

So, online loans are quite different to more traditional loans. This means that they may appeal to different people or provide a lending experience that is not available anywhere else. Even if you feel that they are not the right loan for you right now, it can be a good idea to get to know more about them as you never know whether you might need them in the future. We may think that we will always have a good credit record or that we will never need money in an emergency, but we never know what might happen in the future. Of course, it is lovely to think that we will always have the money that we need, when we need it, but sometimes this is just not the case and we need some extra financial help. Knowing what is available means that you are able to choose the loan which suits your needs the best.