September 30, 2021

How to choose an online loan type

Have you ever found yourself in a situation where you need money urgently, but your bank account balance is reading zero or has insufficient funds? Well, that can happen to anyone, even with astute budgeting skills. In such instances, you need to find a lender who can give you financial support.

There are several factors you need to check before you choose a lender or a loan type. These factors include and are not limited to:

  • Loan amount limits
  • Interest rates and annual percentage rate
  • Applicable fees
  • Disbursement timeframe
  • Overall payment period
  • Installment frequency and amount
  • Repayment method available
  • Online accessibility, among others.

Sometimes, you may not have time to visit the lender’s office due to distance, time, or financial constraints. When such situations happen, you need to find an online lender to help you meet your urgent financial obligations. You may be wondering, how do I choose an online loan type? Well, there are several types of loans you can access online, which include:

1. Quick loan

A quick loan is a short-term loan product designed to help you meet your small financial obligations. Most lenders offer this loan through their website, mobile application, or USSD codes. It has minimal documentation and is often disbursed quickly within hours after application.

This loan can help you deal with short-term financial difficulties, has minimal fees due to its application method, and most lenders do not ask for collateral. Lenders often analyze your historical transactions coupled with other data to determine your eligibility. This loan is usually unsecured.

However, ensure you research and understand the terms before making finalizing the application.

2. Same-day loan

Same-day loans are loans where you get the cash you borrow the same day you apply. Most lenders avail an online platform to apply and receive the funds without visiting the lender’s office.

Many lenders can get you the cash the same day you request it. However, be careful since some of them may only guarantee loan approval within 24 hours, not including disbursement, which may happen the next day. It is convenient but often comes at a cost that may be very high. Additionally, most lenders do not require collateral to secure the loan.

3. Payday loan

Despite your careful budgeting, there are times you find that your finances don’t make it to the end of the month. Are you having a mid-month cash shortage or an emergency at the end of the month? Are you waiting for your salary to pay a cheaper flight ticket in advance or book a hotel for your next vacation? Payday loans are a savior in such times.

A payday loan is also referred to as a payday advance, payroll loan, salary loan, cash advance loan, or a small-dollar loan. It is a short-term and unsecured loan designed to give you quick access to money when you need some extra cash to get through to the end of the month or your next pay date. Most payday loans range from $100 to $1,000, depending on the state and the lender.

A payday loan may help solve a cash flow problem but cannot get you out of financial difficulties due to its limited amount. Most financial service providers offer it as an unsecured loan and require you to pay in a single installment after your employer credits your salary to your account. The interest rates and fees charged on this loan are often higher than other short-term loans.

4. Short term loan

It is a loan product that you can borrow to support your temporary financial needs, such as boosting your business capital. This type of loan usually has a repayment period of six months and 18 months, depending on the lender and the amount you borrow.

A short-term loan has shorter approval and disbursement timeliness, making it a favorite among startups and small business owners. However, this loan usually has a higher interest rate than medium-term and long-term loans.

5. Emergency loan

If you need money for an emergency expense and do not have time to go through a lengthy application process, you may consider getting an online emergency loan. This type of loan is suitable when you need to cover unexpected expenses such as an urgent medical bill, funeral costs, car repair, or partial repair of your house after a natural disaster.

Most lenders often deposit funds directly into your bank account within one or two days. The repayment period is usually capped between three and six months. Emergency loans can be unsecured or secured, which also determines the interest rate. To get an unsecured emergency loan, you will need to have a good credit rating.

6. Personal loan

You can apply for this type of loan to fund most of your moderate financial needs, such as buying a new appliance, paying for a vacation, or school fees, among others.

The average annual percentage rate can range from 6% to 36%, depending on the lender and your creditworthiness. While most personal loans are often unsecured, some lenders may still ask for collateral, especially if you have a low credit score. The repayment period ranges between one month to 60 months with monthly installments.

You may get a lower interest rate if you have a stable cash flow or income and a good credit score. On the other hand, with an unstable source of income and a low credit rating, the annual percentage rate will likely be comparatively higher.

7. Cash loan

There is not much difference between a cash loan and other short-term loans such as emergency and short-term loans. However, some lenders may refer to a cash advance loan which is almost similar to payday loans.

If your credit history is good, you can be confident that you will get a cash loan at a low-interest rate. Your lender will deposit the amount borrowed into your bank account within a few hours or several working days.

Conclusion

Advancement in technology has enabled financial service companies to offer loans online. You can apply for loans online at the comfort of your home and receive the funds almost immediately. If you need an online loan, consider choosing one of the above online loan types. Do your due diligence about the lender and the terms before you apply for the online loan.

About the author 

Peter Hatch


{"email":"Email address invalid","url":"Website address invalid","required":"Required field missing"}