Finance

3 Things to Know About Online Lending

Written by Frank Kremer

For people who need to borrow money, the internet introduces a lot of new options. However, it’s not for everyone. Online lending terms follow certain trends and won’t be appropriate for every kind of customer. It takes certain qualifications and a little digging to find the best terms with online lending. Here are some of the considerations you should make when examining such an option. If you don’t meet these qualifications, it might be worth your time to spend a little time cleaning up your act before seeking out a loan with an online lender.

A Polished Credit History. Your credit history is perhaps the most important criteria for receiving a good loan. This isn’t a dealbreaker for most people; there are plenty of online lenders that cater to people with bad credit. But bad credit isn’t the ideal situation for any sort of borrowing, and most online lenders have a credit score cutoff point at which they will no longer offer new loans to people. If your credit score falls beneath this point, you may not be able to get many loan offers at all. There are many ways to improve your credit. This might entail disputing negative credit history items. It might mean opening a first credit card account in order to build your credit history. It might mean any number of other things. Whatever the case, if you want the best online lending terms, it might be worth your while to focus on this for a month or so before requesting loans.

The Ability to Pay Back Early. There are two kinds of online lenders: the ones who allow for fee-free early repayment, and the ones who charge you fees for daring to pay your loan back early. If you can possibly help it, you only want to work with companies that allow for penalty free early repayment. You’d also ideally want to select loan with monthly payments that you can supersede. If you are able to pay back a loan early, you could save thousands. Of course, it’s no big deal to pay the monthly minimum as long as it’s affordable and the interest isn’t exorbitant. Not every borrower will have a perfect situation, however, so just understand that this will help give you the best of all options.

Explore Your Options. Most online lenders have a huge range of interest and fee offers (together these are your APR, or Annual Percentage Rate) that they make to loan customers. These can range from about 5% to almost 40%. That upper reach is far too expensive to consider for anything but emergencies. With so much wiggle room in the affordability department, it’s well worth looking around for terms that meet your needs and offer you the greatest options in terms of savings.

There are lots of things to consider when seeking out an online loan. With so many different lenders out there this process can be dizzying. But if you have the time and energy to put yourself in the best borrowing situation, online lending can save you both time and money. It’s worth the effort!

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Frank Kremer

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