When you think of online loans , you would naturally equate it with short term loans. You can only get it for short periods and for relatively small amounts. But the times are changing and many things about personal finances are also changing. One of those things would be how online loans are being made available to consumers like you.
Changes with Online Loans
Because more and more people are relying on online loans to get through the month and to meet emergency expenses that cannot be paid for by the usual sources of income on time, payday lenders on the internet are also starting to offer other financial products. One of these products is online loan with monthly payments. Online lenders offer 12 month and even 24 month installment loans.
The same qualities that made payday loans attractive to a lot of people can be found in these loans. The lenders claim that they do not run any credit check on the borrower so even those with bad credit scores or even with no credit history can apply.
How Much you Can Borrow
The amount that you can borrow varies greatly. Some lenders would allow you to borrow more than $35,000, while there are those who would let you borrow more than $100,000. The terms would depend on the lender as well. It could last for a year, while for the larger amounts the term could be up to 24 months.
Advantages of Online Loans with Monthly Installments
The most obvious advantage of this kind of a loan is that it’s available through the internet. That means it is no longer necessary for the borrower to go the lender’s office personally. The whole transaction can now be done completely online. The loan process is similar to one of a regular payday loan.
You start by visiting the website of the lender and providing the needed information on the application form. The information needed would include your personal information, info about your employment, source of income, the amount that you are making, your social security number and your banking information. Once you have provided that information and you have submitted the form, all you have to do is wait for the decision on whether you have been approved or not.
The second advantage of this kind of a loan is that the processing period for it is a lot faster than for other types of loans. Payday lenders can normally process the loans within a day after you have filed an application. The money should be made available to you right away once your loan application is approved.
No Credit Requirements
Most lenders promise that they require some credit checks when it comes to online loans with monthly installments, but it is not true – some form of credit check will have to be performed. In case of larger sums, a lender will pull your credit report. Lenders do not require documents or paperwork in the loan application process but in some cases they may require additional documents to be file, e.g. self employed With all these advantages, it is not surprising that a lot of people would turn to them.
The Dangers of Online Loans
Like with other financial products there is also a downside to online loans with monthly payments. On paper, these loans might seem ideal for some people. They might seem to be the solution that some people are seeking. In reality however, they might turn out to be something else.
The APR could be a burden for anyone, even someone with a high income, but for someone with limited income, that can turn out to be a huge stumbling block. The harsh reality is that those who use online loans or any other type of loan are people who have limited income. So for them to take on a loan with a high interest can be a sure sign to fall into even more financial trouble.
Are Online Loans a Bad Idea?
Most people who use online loans do so because they don’t have any savings. They need the loan to make it through until the next payday. In case of online installment loans, people need a larger amount of cash than the usual payday loan can provide them with.
Taking out this kind of a personal loan will help increase your credit score.
Consider the Alternatives
The good news is that there are several alternatives that you can turn to before you resort to online loans.
Payment Plan for Creditors
Some people take out online loans in order to pay off their creditors. They might be falling behind some of their accounts or they want to consolidate their debt. While the intention is okay, the use of payday loans for such a purpose is not wise. The high interest of online loans would make it even more expensive than the existing loans that you have. The best thing that you can do when you are falling behind some of your accounts is to talk to your creditors and find a payment plan. You should also get a guarantee from them that they would not report your account as delinquent so it does not affect your credit score. Most of the time, creditors would be willing to work with you.
Advances from Employers
Some people with cash problems forget the simplest options that are available to them. One example is taking out a cash advance from your employer. This means that you are getting your salary ahead of time. You are not borrowing anything at all. Most employers allow advances and they even have forms for that. One thing to remember is that you shouldn’t do this too often. Taking out cash advances regularly might affect your goo standing in your workplace.
This does not mean that loans from online lenders are bad in general. Like any financial product they can be beneficial for the customer if used in the right way, but the nature of online loans makes it easy to get but difficult to pay back. That leads to many consumers being led into a debt trap, which they can’t get out of because they have limited income. So you should be wise on choosing a proper financial product to suit your current needs.