Online loans are the new type of loans that you can take wherever you need. Sitting on the couch or the beach, looking for money to buy a car or an apartment it doesn’t matter anymore. Today you don’t need to spend hours in the bank to get approval. There is no need to humiliate yourself in front of that guy who is listening nearly 20 stories of those who wants to get a loan. You also do not need to even leave your apartment. Click and get the guaranteed approval in several seconds and your money directly on your account. Though the sphere of online banking is relatively new, there are some essential peculiarities to puzzle out.
ID, Phone number
max 48 hours
1% per day
up to 30 days
ID, Phone number, email
max 24 hours
1.3% per day
up to 21 days
Types of Online Loans
There is a big variation of online loans. It depends on the needs and financial conditions of the person who needs the loan. The main types of online loans are:
- Personal lending people take for any needs. This type is divided into two main types: secured and unsecured loans.
- Secured loans are distinguished by the asset criterion. The collateral could vary from the car or the house to some kind of jewelry. So if the borrower is unable to return the repayments the bank takes his property. In this way, the guarantees are to the bank are given.
- Unsecured loans are the loans without collateral. The evidence of your capacity to pay regularly would be the income certificate. If the loan is the first there should be someone who will prove your regular income. This person is called a guarantor.
- Payday loans (short-term loans, cash advance) are usually taken in case of an emergency. Normally this type of loan refers to the micro-loans. The term shift from 2 weeks up to 100 days. This depends on the bank and the country. For example, in Philippines payday loans can be given from 7 days to 120 days. More than that, in the majority of cases the lender has the full access to the bank account of the lendee.
- Salary loans online have nothing alike with ordinary Bank loans. It is short term loan and it is provided with a certain number of days.
- Student loans – money lending on educational purposes.
- Car loans are more like payday loans, though the collateral is the car title.
- Рееr-to-peer loans – the community of creditors help the loaner to be released from the debt.
- Home equity loans – the lender is the capital of borrower’s home.
When to Take Online Loans?
However the loan doesn’t seem to be a good idea for many people at all, there are several reasons when the online loan would be a good move.
- Credit cards unification
Sometimes it could be quite disturbing to keep an eye on several cards. That is why personal online loan could be at hand. Many people use it to consolidate credit cards and make one payment instead of multiple every month.
- Additional fund pay for student loan
The interest rate of student loans may be extremely high (up to 6%). Consequently, people take a personal online loan to repay the student loan faster. However, it should be mentioned that there are some serious issues concerning the benefits that come with the loans. In case of paying the student loan with the help of personal loans, such advantages as forbearance and deferment could be lost.
- Necessary home renovation or a wedding expense
It could be handy to request a loan for such purposes, though the borrower should look carefully through the loan types, and choose the one with better conditions. Many experts, by the way, advice to use personal loans instead of home loans for the house improvements, as there are fewer chances to put the house as the collateral. In wedding case when the couple needs money in a short time the fast service and the shortlist of requirements serves well.
- Better credit score
Small personal loans that were repaid in time and good credit card history will definitely improve the lender’s creditworthiness in the future.
- Medical emergencies
And again the money that comes on the card within an hour could save the day or someone’s life.
- Business loan
To finance a start-up without any financial background or movable and immovable property some young businessmen take personal unsecured loans. The procedure is simpler than in banks and the risk is minimal.
Urgent business trips or just unplanned family vocations, often becomes a justified reason to take a loan.
To sum up, the borrower should always have a repayment plan no matter on the loan reason. An also it should be noted that except for the principal sum there could be numerous taxes and high-interest rates.
Pros and Cons of Online Loans
The views regarding the necessity of online loans are divided. Nevertheless, there are some pros and cons that should be taken into consideration while making that decision.
Advantages of online loans:
- Credit history is overlooked;
- High-speed service (Some online loan services can send the money on your card in an hour);
- Wide range of loans (There are lots of types of loans that could meet all the requirements).
Disadvantages of online loans:
- High-interest rates (The opportunity of the quick loans also costs extra money);
- Limited repayment time (The period when the money should be returned is much shorter than in bank);
- Concealed fees (Several online loans services do not inform about the underwriting, opening, closing, application and other types of fees).
Online Loan Requirements
Online loan documentary requirements peculiarities in the Philippines are:
- Payslips or bank statements for self-employed;
- Certificate of employment or ITR;
- At least 2 valid IDs;
- The proof of address (utility bill);
- Personal bank account.
Bank Loan vs. Online Loan
- There is no possibility to take a loan in the bank if a person doesn’t have the asset. The collateral is necessary for banks when online loan services offer unsecured loans for everyone.
- Banks have a strict schedule they also have long queues that make the process of credit taking lasts forever when the online services send the money on the same day.
- The online service is a very young developing industry and gets a lot of creative decisions like for example peer-to-peer loan. That really works for those who have already lost hope to get a credit in a bank.
- The interest rate in 99.9% of cases is higher online, though the fees sometimes could be lower than in the bank.
Loan Fees and Rates
Here is the list of the loans fees in the Philippines below.
- Effective interest rate (EIR) – simply the “cost” of the money that was loaned (ranging from 10% to 30%);
- A monthly interest charge (the interest rate that is paid monthly);
- Processing fee (application fee that includes the administrative costs and the credit checks );
- Late Payment fee (the miss of the payment charges about 3%-8%);
- Early payment fee (about 4% – 8% fee for those who ended up the loan repayment earlier).
When to Avoid Online Loans?
First of all, the person should never borrow money he hasn’t the repayment plan. The loss of the house, car or family jewelry could become a real tragedy which would be accompanied with the subpoena. Secondly, the unreliable lender leads to the interest rates growth and hidden fees that will in total exceed the principal sum in several times.
How to Pay for Online Loans
To get an online loan you need to make the same procedure as anywhere else, though you can do it being anywhere on the planet Earth and at any time. After following the simple and clear instructions you need to enter your data according to the service requirements and get an approval within several minutes. The monthly payment will be automatically charged from your credit card.
This is not the complete list of online loan consumer rights, but the following points are essential.
- The credits decisions could be based on the financial condition of the loaner only! (No racial, national or gender discrimination is allowed)
- The loaner should be free from revealing his/her marital status.
- The response should be sent within 30 days.
- The rejection of the loan should be explained.
- The loaner has the right to inquire about the total loan cost.
- The loaner has the right to inquire the translation of the terms on his/her language.