Should you take out an Online Loan? How borrowers are turning to online borrowing options with added ease, expediting, with different qualifying options.
Eventually, everyone borrows money. Whether it’s a mortgage to purchase a home or a line of credit to fix an unexpected flat tire, borrowing helps you achieve goals and cover important bills.
If you wanted a loan or line of credit in the past, you would have had to arrange a meeting with your financial institution and spoken with someone in-person. Nowadays, things are changing. People are moving away from storefront locations in lieu of online loans.
More People Are Turning to Online Borrowing Options
According to data from TransUnion, 38 percent of all U.S. personal loans were issued by FinTech services. That’s an uptick of 3 percent from 2017.
But what does FinTech mean? As a portmanteau of Financial and Technology, FinTech can be any back-end platform that helps financial institutions process transactions.
At its most basic, FinTech can be a calculator that crunches big calculations involved with interest or amortization. But more complex forms of FinTech describes innovative platforms digitizing the process of granting loans — like the technology that allows a financial institution like CreditFresh to process line of credit request forms in a matter of minutes.
Convenience Drives the Online Borrowing Experience
What does ordering your groceries from your laptop rather than going to the supermarket have in common with online loans? Or what about texting a customer service agent rather than calling or going in-person to the store?
Simply put, they’re easier to do than their analog alternative. So is getting a personal loan or line of credit online rather than in-person.
People are busy, after all, and it’s not always easy finding the time to get to a bank during business hours. And as a wave of financial institutions shutter the doors of brick-and-mortar locations in rural America, it’s sometimes impossible.
With online loans, it doesn’t matter how near the next financial institution is to your home. You don’t have to take time out of your day to get to a financial institution during business hours, and you don’t have to have a face-to-face meeting with a financial advisor.
A totally online application is available 24/7. As long as you have the Internet, you can compare rates and apply from your spot on the couch at any time you have to spare.
Automation Offers Fast and Simple Platforms
The online loan experience tends to be faster than in-person options because so much of the lending process is automated. While there is still a human element involved, technology takes over many of the time-intensive tasks involved in underwriting and approving loans.
The decision to lend money hinges on a lot of mini assessments of your finances to see if you qualify for a loan. In many cases, they boil down to a simple set of yes or no questions, such as:
- Do you have a prime credit score?
- Do you have a bank account?
- Are you a U.S. citizen or permanent resident?
- Do you earn enough to cover your repayments?
The answers to these form the basis of conditional statements (or if-then statements) that tell the program what to do. According to the program’s logic, if a borrower meets all these requirements, then they qualify for the loan or line of credit.
Online loans can safely automate these evaluations with powerful tech, and they speed through these yes/no decisions at a pace no human could match. What would take a financial advisor the better part of a day to do, a computer can do in seconds.
For the borrower, this means you’ll know if you qualify in a matter of minutes. If you’re approved, you may receive your online loan as soon as the next business day.
Different Qualifying Data Improves Chances of Approval
Online loans use a variety of ways to assess your creditworthiness. Some online financial institutions take a holistic view of your finances rather than focusing on a few specific data points from your credit report. They may look at your income, pay schedule, and employment records to help them make this decision.
By diversifying their qualifying data, it becomes easier for people who have less-than-perfect credit to find a loan in an emergency. They may also be able to qualify for a bad credit personal line of credit.
Should You Take out a Loan Online?
If you’re waiting on a simple yes or no answer, you’re in for a disappointment. Whether an online loan is right for you depends on a lot of factors, like your needs, your current financial situation, and your future goals.
There’s no one-size-fits-all answer that’s palatable for every borrower. This is incredibly personal decision you should make only after a lot of research and reflection.
Nevertheless, there’s no denying the waves of change online loans are making in the financial world. Even though in-person loans will likely always be an option, online loans are taking more of the market share each year. They’re transforming the way people think of their finances, and how they might borrow money in an unexpected emergency.