How online loans work is a popular conundrum. Online loans are payday loans or quick loans which are available online. Online loans are now the most popular form of online loan. Many consumers enjoy the easy application process and the privacy of organising their finances from their own home.
Online loan providers have their own websites. There are many to choose from, some better than others. There are also loan brokers, like CashLady, which have a panel of approved lenders.
Once you have identified a reputable loan company or broker you would like to use the next step is the application form. This will be shorter and simpler than a traditional lending or loan applications. You will submit a completed application form and the loan company will decide if they will allow you to borrow the money. They will perform credit and affordability checks. The loan company will decide if you will be a good borrower and able to repay your loan within the terms.
You will likely communicate with the loan company via email. You may need to provide evidence of your earnings and identity. A phone call might be required to verify this information. If your loan is approved you may need to signify your agreement to your loan terms. Your lender may send you a code via text message which you then input online.
How online loans work. When to use an online loan
Let’s look in depth at how online loans work. As with quick loans and payday loans. Short term lending has high interest rates and a short repayment term. Online loans are popular as they are very fast and often easier to get. An online loan can even be approved, and the money sent, within a day.
Because of the higher interest rates, online loans are more suitable for emergencies. An emergency could be an immediate need for cash such as money for a car or home repair. To pay an unexpected expense, or where your wages are late.
Online loans will normally need to be repaid on your next payday or soon after. You must remember that this will use some of your next month’s wages and may leave you short. Online loans, payday loans or quick loans should not be used to pay off other debts. This may cause further financial problems as you pay out more, and more in interest rates.
If you have debt or financial problems each month seek advice. Carefully consider whether an online loan is right for you. Always make sure you understand exactly how much you will have to pay back and when. You should also understand what will happen if you are not able to repay any loan. And, the implications this will have for your future finances.
How online loans work. Finding an online loan
Advertising by online loan companies
Online loan companies spend many thousands on advertising. You may see an advert in a magazine, on the internet, or on the high street.
Word of mouth
You may have an online loan company recommended to you by a friend or associate. You could also ask your friends and family if they can recommend a loan company they have used, and are happy with.
Using the search engines to find an online loan
The most common way to find an online loan company is to search the internet via Google or another search engine. Searching for an “online loan” will give you many hundreds of results. It can be hard to choose which loan company is reputable or might be right for your situation. Remember to look for credible, well-built websites. Make sure information about who the loan company are and where they are located is clear. Ensure any loan company is registered and regulated by the FCA. Always look for independent reviews of a loan company you are considering using.
Using an online loan broker
You can also find an online loan through a loan broker. A loan broker, just like the CashLady website, has a selected group of lenders. Completing an application form with a loan broker will mean your application for a loan is looked at by a panel of suitable lenders. A loan broker will select their chosen lenders and should make an effort to choose good, reputable companies. The loan broker and their chosen panel lenders should all be FCA registered.
How online loans work. Applying for an online loan directly
When you apply for a loan directly with an online loan company you will complete their application form. That lender will consider your application. They will complete credit checks and check if you can afford the loan. If you are approved you will proceed with your loan.
You may find that you want to compare loan offers and providers. Or, are refused for the first application. You will then submit more loan applications on each lenders website. Each lender will conduct a credit check.
How online loans work. Applying for an online loan with a loan broker
Applying for a loan with an online loan broker is slightly different. You will complete one application and have one credit check. Your application will be submitted to the loan brokers panel of lenders. Or just a few lenders who might consider your circumstances. You may then receive an offer in principle from one, or a few, lenders to compare. When you choose who to go ahead with they will more thoroughly check your identity, suitability, and background. You will then proceed just with the one lender.
How online loans work. Getting approval for an online loan
To be approved for an online loan you must meet certain criteria. You need to have:
- A UK Bank Account
- Earnings of more than £500 per month
- A working email address and mobile phone
If you meet the criteria and can afford the loan the lender will conduct a credit check and ask you to prove your identity. You may then be offered your online or short-term loan.
Agreeing to an online loan and receiving payment of monies
As with any type of lending, there will be borrowing terms, repayment terms, and potential charges. A loan company should not charge you for taking out a loan. A loan broker will not charge you for finding a loan. There could be penalties in the terms, you should be aware of though.
You must read and understand any terms thoroughly. Your online loan provider will have an electronic method of confirming your agreement to terms. Often via text message. Once your loan is agreed and finalised the money will be sent electronically to your bank account. For more information on how online loans work, you can always get in touch with CashLady.