If you’re in the market for a personal loan, you are not alone. The personal loan market has surged recently, with the total outstanding debt now over $156 billion. And if you are considering a personal loan, it should be clear that there are more lenders than ever before. Fintech startups, online banks, and traditional lenders are all vying for market share in this growing space.
As a borrower, you have options. Let’s take a look at some of the pros and cons of online personal loans.
If the most crucial factor to you is speed, online is the way to go—some online lenders review, process, and fund loan requests within 24 hours. Whether you’re applying to an online-only bank or a traditional lender with an online option, the process will go quicker online than in a brick-and-mortar location.
Everyone knows that the internet is great for price transparency. It’s why so many retail stores can no longer compete with the likes of Amazon. Well, the same impact works in your favor when it comes to loans. Online lenders are more open with their rates than offline institutions. You can research rates and shop around before getting started on an application.
3. Lower Fees
Since online lenders are by design sleeker than their brick-and-mortar counterparts, they have lower overhead. Thus, they can pass those savings along to their borrowers. Online lenders typically have lower fees overall, and some offer no origination fees on new loans. While that’s not always a guarantee of the best deal (check the APR to ensure the lender isn’t making up the difference with a higher rate), a personal loan with no origination fee can often be the best option.
1. Information Security
When applying for a loan online, a borrower will have to enter personal information: social security number, bank account information, date of birth, etc. If you’re uncomfortable providing this information online, it may be best to consider an offline loan. While most online lenders are reputable, there are scammers out there, so prospective borrowers should protect themselves. If a site doesn’t seem legit, don’t provide your information.
2. The Best Deal?
While many online lenders offer low rates, it’s not a given that the best loan for every borrower will be found online. In fact, for some borrowers, especially those with less-than-desirable credit, a local bank or credit union might offer more attractive terms. Borrowers should always be aware that in addition to the interest rate, there are fees and the payment terms to consider.
3. A Face and a Name
It may seem old-fashioned, but some borrowers are just more comfortable dealing with a loan officer. And for those that fall into this camp, the solution is obvious — go brick-and-mortar. Community banks and credit unions are particularly adept at providing this face-to-face experience, and they offer loan terms that often match what can be found online.