Personal Loans Online – What You Need To Know

A young couple are shown at home researching and applying for a personal loan online
Online Loans And Types Of Credit
Part 1 Different Types Of Credit
Part 2 The Popularity Of Credit Cards
Part 3 Applying For A Credit Card
Part 4 Personal Loans Online – What You Need To Know

Many lenders offer personal loans and all the mainstream banks have websites where you can find offers for this type of financial product. A personal loan is unsecured credit and this means there is no need to put up any collateral. Loans are available over a short period of six month and up to ten years. In this article we look at:

  • Online personal loans
  • Paying off short-term loans
  • Understanding your loan contract
  • Taking on debt

The most popular term is five years. Interest rates for personal loans vary and the longer the term of the loan, the lower the interest rate. Conversely, a longer term means that you will be asked to pay more in interest charges. The overall total cost of a loan is a very important point to consider before you commit to the agreement.

Applying for a personal loan online

If you are applying for a personal loan online the lender will check your credit rating and request information about your income and outgoings as well as other personal information. Applicants need to prove their identity and where they live. Personal loans are usually set at a fixed interest rate so you will know exactly how much monthly repayments are going to cost.

Personal loan payments are fixed at the start of your agreement

A personal loan can be used to make a larger than average purchase like a car, furniture for the home or to pay for a home extension. You can also use a personal loan to pay off existing debts. Sometimes this results in lower overall payments each month. The interest rate for a personal loan may be lower than those you are already paying on existing contracts. However, it is a good idea to get some advice about debt before taking on a financial commitment in order to clear debt.

Paying off a personal loan

The payments for a personal loan are fixed at the start of the agreement as is the interest rate. At the end of the term the loan is fully paid off and the contract is at an end. As long as you make all the payments on time there will be no further charges. But, if you miss or make some payments late you may be subject to higher interest charges or fees.

When taking out a personal loan it is important to check whether there are restrictions for paying off the loan at an earlier date. Some lenders ask for fees in the form of extra interest if you redeem the loan early.

A couple are shown shopping online with the use of personal loan funds

You may get a better rate from your own bank so this is the place to start when searching for a good deal. However, some online lenders are able to offer cheaper rates as their profit margins are lower. In addition to looking for a good interest rate you should also check whether personal loans are restricted in your home state as some banks do not offer installment loans in certain areas of the US.

Understanding the terms of your short term loan contract

Before signing a contract for a personal loan it is important to check out all the details. Look for the length of the term, the amount borrowed, the APR and most importantly, the total cost of the loan. Adding up how much it will cost you overall is a good indicator to whether the deal is good.

Rates vary greatly for personal loans and you may be offered a low rate of around 8% APR but currently some lenders are charging up to nearly 16% APR. The rate on offer will be reflected by your credit rating as well as the other factors mentioned.

APR for personal loans ranges from anywhere as low as 8% up to 16%

Taking out a personal loan is a long term commitment so always make sure that you feel comfortable and have plans in place should something unexpected happen. Look into taking out some credit protection insurance/loan repayment insurance that will pay off the debt should you lose your job or suffer from a debilitating illness that makes it impossible to work.

Taking on debt

Ever since the financial crash, Americans have become cautious about taking on more debt but as interest rates are so low there has been little or no incentive to save. Some families have seen large amounts of debt swallow up their monthly income and these are the people who have turned to expensive payday loans as a means of topping up their salaries. The drop in value of homes has been another important factor that has reduced the amount of credit being taken up.

Online credit summary

This series has identified some of the most popular online credit products that are available in the US. There are other financial contracts like hire purchase, car loans and payday loans. For a very short term monetary emergency you can also ask your bank for an overdraft.

Taking out a personal loan is a long term commitment so always make sure that you feel comfortable and have plans in place should something unexpected happen.

Home loans, credit cards and personal loans are all excellent financial tools but all of them should be undertaken with care and caution. The most important point to remember about online credit is that the lender is in the business of making profits. So, look at all the available options and the fine print details of the contract before taking on any kind of credit agreement.

Online Loans And Types Of Credit
Part 1 Different Types Of Credit
Part 2 The Popularity Of Credit Cards
Part 3 Applying For A Credit Card
Part 4 Personal Loans Online – What You Need To Know

About the author

Mark Larsen

Mark Larsen has worked in the finance industry for over 20 years. Over the course of his career, Mark has amassed experience in personal finance and especially short-term lending. He shares his valuable insights on onlinecreditusa.com