Basic Tips for Understanding Online Loans: What to Look For and Common Pitfalls to Avoid | WalletHub
Expert Opinions
By Aniruddha Pangarkar – Associate Professor of Marketing at The Austin E. Cofrin School of Business – University of Wisconsin-Green Bay
Do you have any tips for finding the best loans online?
There are several reasons why individuals seek loans- to pay off a huge credit card debt, for home improvements, for medical expenses, wedding expenses, vehicle financing etc. If you are seeking an online loan in such situations, it is important to do your own market research before you finalize a loan. Typically, you should compare at least 3-4 lenders and see what their approval requirements are. Having a good credit score in excess of 690 certainly helps. When you do your online research, make sure you compare aspects such as application fees and prepayment penalties, depending on the loan amount you are looking at, it is good to look up credit unions and banks and also their origination fees.
It is also good to know repayment options- for example long-term loans have low monthly payments but would have significantly higher interest rates which might not be practical for you. Also, please look up if the lender offers autopay discounts and how they can keep your private information secure (an important consideration in today’s world of cybersecurity scams). It is also important to study customer experiences and Google reviews- that would tell you how the lender values customer satisfaction and if they are really credible and have high quality customer service standards. You may also check if a lender is able to allow a co-borrower on the loan- this would help if you have a lower credit score and are worried about not qualifying for the loan. Many online lenders have lower interest rates and fees, streamlined undertaking to ensure quicker decisions, and quick turnaround times.
What are the biggest mistakes to avoid when shopping for a loan online?
First and foremost, it is important to look at the lender’s reputation and credibility, customer reviews, and if there is any negative news about the lender. Also, check your own credit score because it will help you determine if you qualify for a loan or need the help of a co-borrower. In these days of marketing gimmicks and publicity, do not be swayed by websites that took neat and smart. Compare and contrast at least 3-4 lenders and do your research. It is good to see if you pre-qualify for the loan and what the process entails, along with interest rates, length and term of the loan, any penalties that are part of the agreement. Also, loans have a lot of terms and conditions- be sure to read the fine print before committing because it will save you a lot of trouble later on. Never pay for a pre-approval, check if the online lender is properly licensed, and evaluate their overall reputation and credibility. In short, when researching online, you need to undertake all these steps to make an informed decision.
What would you say the best online lenders have in common?
Many online lenders such as Upstart, LendingPoint, and Upgrade are popular because they help qualify people quicker for loans, the process is somewhat streamlined, and they are agile and speedy in ensuring borrowers do not have to wait longer. The best online lenders are clear and transparent in their communication and do not have any hidden fees or origination fees, superior customer service and availability to solve customer concerns and problems, digital process and quick approvals with ability to track the status of one’s application, reasonable interest rates, fewer fees, and refinancing options, possession of mortgage licenses, and reputation with such organizations as Better Business Bureau and Online Lenders Association.
This article is featured in WalletHub – Best Online Loans
