Online loans are very common today. Still, there may be a lot you don’t know about them and you may feel silly asking about them too.

What might surprise you is that you are not alone. Many people don’t know enough about online loans or they think they do and they’re wrong.

Luckily, there’s no judgement or misinformation here. We’ve answered some of the most common, but unspoken questions about online loans and dispelled a few myths too. Hopefully, this will not only answer your questions – it will also help you decide whether online loans are right for you.

Is it safe to take out online loans?

Yes, providing you take the necessary precautions. Choose a trusted lender that is legally regulated in your jurisdiction. State laws cover things such as transparency, data protection, your rights as a borrower, and the lender’s responsibilities too. This also provides ways you can deal with problems, should the lender fail to fulfill their duties.

What should you look for in an online lender?

With so many online lenders available, you may not know where to start. Plus, some are disreputable. We suggest you shortlist a few lenders and then do the following:

Ensure they offer what you need

Check that the lender caters to your needs. Some only deal with those with the best credit, while others welcome those with little or no credit or a poor credit score. Still others offer online loans to those with alternative income sources.

Visit the lender’s website

Go directly to the lender’s website. Is there a padlock on the URL in your search bar? This indicates they use HTTPS to secure the data transmitted between your browser and the website is encrypted.

Do an internet search by company name to see if any news stories pop up too. You can do this by using the “news” tab in Google.

Lastly, check the domain name registration to determine how old the website is. If it is very recent, chances are its not meant for legal purposes.

Check their reputation

Look at their Better Business Bureau file. It may include a physical address and other contact information to verify they are legit. If they are BBB accredited, you can see if there have been any complaints against them and whether they were resolved.

You can also check online reviews through independent sites such as Trustpilot. Just input the URL of the website. Look at the database of complaints held by the Consumer Financial Protection Bureau too.

How does an online loan work?

Basically, much like any traditional lender except it is usually an easier and faster process. The lender asks you to fill out an online application form with personal information to determine your eligibility for a loan. This usually includes how you earn income, your credit, and your work and home stability.

They review the information to determine whether to offer you a loan or turn you down. If they do offer you an online loan, they will also set the interest rate and other loan terms.

Are online loans more expensive?

Not necessarily. Online lenders are competitive. What they offer you is based on many factors and if you think the interest rate offered is too high, you don’t have to accept it. Apply again through a lender that uses pre-approval. Otherwise, multiple applications can mess with your credit.

What benefits do online loans offer?

The principle benefits of online loans are convenience, simplicity, and speed. Apply from any device at any time.

Online lenders tend to use a simplified application process too. Consequently, you usually get a response very quickly which makes it easy to get on with your life.

Online lenders also serve those that mainstream lenders ignore. As a result, you can find online loans for those with alternative income sources and almost any credit score.

What drawbacks do online loans have?

Online loans use customer service, not a dedicated loans officer. You must also do your due diligence when it comes to a lender to ensure they are legitimate and trustworthy.

Some lenders charge origination, administration fees, pre-payment penalties, or steep late fees, but so do many mainstream lenders. Some lenders also charge those with less than perfect credit very high interest rates. Still, you can avoid this if you use pre-approval and comparison shop. Online loans aren’t more expensive if you choose wisely. They can actually be cheaper.

Does applying for online loans hurt your credit?

If you use a pre-approval process, it will not affect your credit. If you apply for a single loan without pre-approval, it will cause your credit score to drop by a few points. If you apply through many lenders independently, it can have a significant impact. You can avoid this by using a loan portal.

Is there anything you can’t use an online loan for?

Generally, online lenders won’t grant loans for post-secondary education expenses, real estate, business, securities, and sometimes for buying vehicles. None offer online loans for illegal activities.

How much can you borrow?

This depends on the lender, your creditworthiness, and other factors such as your income and debt load. Many online lenders offer pre-approval so you can see what’s potentially available to you without lowering your credit score.

Do you need to provide documents?

Some lenders do ask you to upload documents to verify your income, employment, and residence. Others use electronic income verification through your bank. This speeds the process and may eliminate document uploads.

How long does it take to get a decision?

Good lenders provide a response within minutes, unless they need more information from you. Others take days. Luckily, online lenders usually pride themselves on a speedy process so it shouldn’t take longer than that.

How much time do you have to decide whether you want the loan?

If a lender offers you a loan, nothing happens unless you decide to move forward. You must accept the loan terms (payment amount, length of loan, interest rate). Then they prepare your loan documents.

Usually, the lender allows you around 3 days to sign the documents electronically. If you don’t sign, they may withdraw their approval and cancel your application. If this happens you can still reapply at a later date without any problems.

How do you get your money?

The money is deposited directly into the checking or savings account you provided on your application form. It has to be an American bank or credit union, due to legal requirements.

How long does it take to get funds?

The lender determines the timeline, so read the fine print. Good lenders release funds the same day or the next working day after you sign your loan documents. Delays can occur due to holidays and your financial institution.

Can you increase your online loan amount?

No, you cannot increase your existing online loan amount. It remains fixed for the full duration of your loan agreement.

Can you take out more than one online loan?

If you apply for another online loan from the same lender they will probably turn you down. Once you pay off your initial loan they are very likely to approve you for another and may even offer better terms.

If you apply for an additional loan through another lender, you will need to show you can afford it during the application process. Your original loan payments will be included in their calculations.

Even if you can afford another loan, that doesn’t mean you should get one. The effects of carrying debt are negative and it can definitely affect more than your finances.

How much do you have to pay each month?

Online loans are usually repaid in fixed monthly installments. The amount of your monthly payment depends on how much you borrow, the repayment period you select, and the total interest charged for your online loan based on the interest rate. Many online lenders provide loan calculators so you can find terms that suit your finances and life.

How long does it take to pay off an online loan?

If you choose a shorter repayment period, you pay less interest. However, this can also make it difficult to manage your finances. If you choose a longer term, your payments will be lower, but you will pay more interest.

Once you decide the timeline that suits you, you can see your payment amount and when you’ll pay off the loan. This information is also in your loan documents and your online account.

Can you pay more than your scheduled payments?

Yes, but some lenders charge a pre-payment penalty. Luckily, many do not so you can make extra payments or pay off your entire loan anytime penalty-free. Check the fine print before you commit to a specific online loan.

Do you have to pay late fees?

Yes, if you don’t pay on time or if your account does not have sufficient funds to cover your payment, lenders charge a late fee. The amount of the late fee depends on the lender.

Late payments usually impact your credit score, so you definitely want to avoid them. Fortunately, most lenders offer autopay to eliminate this issue.

What other fees can online lenders charge?

Some lenders charge an origination fee. It may be a one-time upfront charge subtracted from your loan funds that costs between .05% and 5% of the loan amount, or included in the loan itself. Not all lenders charge this fee. Check the fine print.

Some lenders also charge a processing fee if you do not use their preferred repayment method. It may be called a “convenience fee”, “payment processing fee”, or third-party fee”. You can avoid this fee by using autopay from your bank account.

FlexMoney is your Portal for Online Loans

FlexMoney USA is your source for responsible, safe lending. We offer installment loans with instant approval from a network of reputable U.S. lenders. Loans range between $200 and $35,000.

Our process is safe, easy, and fast. Find out what’s available to you in minutes, without lowering your credit scores. Complete one application form, compare interest rates and terms through multiple lenders, and find the best online loans in just a few minutes.

Apply today and discover why so many people choose online loans over others.