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Whether you need funding for a big-ticket item or help paying for an emergency expense, an online loan can be a great solution to your financial troubles. Online loans come in many forms, from personal loans to installment loans and bad credit loans. As the name suggests, you can get one by applying online through either a direct lender or an online loan marketplace.
When it comes to online loans, the lending requirements and loan application process depend on the type of loan you choose and the lender themselves. With so many options available, you’re sure to find something that meets your financial needs and works with your credit situation.
If you’re considering taking out an online loan and want to know your options, here’s everything you need to know about their purpose and requirements, plus some tips on how to find the best options.
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What Is an Online Loan?
An online loan is any loan you can get over the Internet. Some of the most common subcategories of online loans include:
When it comes to getting an online loan, there are many types of direct lenders available. These include traditional banks, credit unions, and state licensed lenders. Some of these options are exclusively available online, while others also have storefront locations.
There are also online loan marketplaces with a network of partner lenders offering different financing solutions. You only need to complete a simple online application to see your results. Online marketplaces are helpful for those who want to compare multiple lenders at once in one convenient place.
The downside is that these marketplaces do not typically offer loans themselves. What this means is that you’ll still need to apply for financing through a specific lender before taking out a loan. In some marketplaces, the partner lenders might not all be reputable or have the best offerings available for you.
If you’re looking for speed, security, and a more personalized experience, online loans from direct lenders may be your best bet. These options also usually come with faster decisioning and funding times than if you were to go through a marketplace or storefront lender.
When you apply through a direct lender — especially if you go through an emergency loan direct lender — you can typically expect a streamlined application process. Most of the time, you can apply entirely online. However, some lenders will require a follow-up phone call to complete the process.
As with other types of loans, online loans come with their own requirements based on the loan type and the lender. It’s important to familiarize yourself with your options before applying so that you know which online loans best suit your financial situation.
Keep in mind that certain online lenders also offer a prequalification process. This lets you see if you’re eligible for a loan without having to apply. This can save you the headache of having your application rejected and help you avoid an unnecessary inquiry placed on your credit file.
Online Loan Use Cases
Online loans have many purposes, but certain loan types are more flexible than others. Here are some of the most common types of online loans and their main uses:
- Installment Loans or Personal Loans: Sometimes called personal installment loans, these online loans can be used for nearly any reason, including debt consolidation, major purchases, home renovations, or emergencies. Unlike payday loans, installment loans often have repayment terms ranging from several months to years. They also come in varying amounts, ranging from a few hundred to several thousand dollars or more.
- Mortgage Loans: Certain banks and mortgage lending companies offer mortgage financing to help borrowers purchase a home. These loans may have a more in-depth application process and stricter requirements than other online loans.
- Debt Consolidation Loans: Another major use case for online loans is debt consolidation. This involves combining multiple high-interest debts into one loan with a single monthly payment. If you have good credit, you could even end up getting a lower overall interest rate, which could save you money on interest over time.
- Short-Term or Fast Loans Online: Designed to cover sudden or surprise expenses, these options usually come with shorter repayment terms and quick funding times. Payday loans are a common type of short-term loan for bad credit as they may not require a credit check. Unlike installment loans and other online loans, however, payday loans must be repaid in a lump-sum payment rather than in smaller amounts over time. Other personal loans for bad credit include cash advance loans.
Can You Get an Online Loan With Bad Credit?
Yes, getting an online loan with bad credit or a sparse credit profile is possible. In fact, some direct online lenders — like Jora — specialize in working with borrowers with bad or fair credit. You’ll still need to undergo a credit check, but the lending decision will depend on factors other than your credit score.
If you decide to apply for a personal loan with bad credit, plan ahead and calculate the monthly payment and overall cost of the loan first. This will help you decide if you can truly afford to repay the loan on time and if it’s worth applying for one.
Also, choose a reputable lender with transparent rates and no hidden fees. With Jora, for example, you can calculate the loan cost before applying. This lets you know exactly what you’re getting into before committing.
Before you can get an online loan, you’ll need to meet the lender’s specific requirements. With certain options, such as emergency loans from direct lenders, the lending requirements might be more lenient. Other online loans, like mortgage loans or debt consolidation loans, include more stringent guidelines.
Keeping that in mind, here are the general requirements for getting an online loan:
- Proof of Identity: You’ll typically need to provide a government-issued ID to get a loan. This could include your driver’s license, state ID, passport, Social Security Number, or Individual Taxpayer Identification number.
- Minimum Age: Most lenders require borrowers to be at least 18 years old (19 if residing in AL). Depending on your state of residence, you may need to be older.
- Proof of Residency: You’ll also need to provide proof of residency in the state or country in which you’re applying for a loan. Commonly accepted forms of documentation include a rental leasing agreement or utility bills in your name.
- Sufficient Income and Verifiable Employment: Income requirements vary by lender, and not all lenders will indicate a minimum requirement. However, you’ll typically need to prove that you’re currently employed or receiving some form of steady income which may include social security or government assistance. When applying, ensure you have copies of your recent W2s, pay stubs, bank statements, or tax returns.
- Minimum Credit Score: Direct online loan lenders often only work with borrowers who meet specific credit score requirements. The exception to this is no credit check loans or emergency money loans designed for borrowers with bad credit. Generally, the higher your credit score is, the better your chances of getting a loan with the best rates and terms.
- Debt-to-Income Ratio (DTI): DTI refers to the percentage of your gross monthly income that goes to paying off your monthly debts. To calculate this percentage, add all your minimum monthly debt payments and divide the result by your gross income. For example, if you make $2,500 a month and spend $1,000 on debts, your DTI would be 40%. Most lenders prefer working with borrowers who have a lower DTI.
- Clean Credit History: When a lender checks your credit score, they’ll also typically pull up your credit history. Any major red flags — like an active bankruptcy or accounts in collections — could lower your chances of getting approved for an online loan.
Finding the right online loan lender can be tricky, especially if you’ve never done it before. Fortunately, it does not have to be that complicated.
One of the easiest ways to find a direct lender for an online loan is to do a quick online search for one licensed to operate in your state. “online loans,” “bad credit loans,” or “installment loans”.
It’s important to shop around for online loan lenders before choosing one. Doing this can help you make an informed decision and ensure you get the best loan possible.
If you’re trying to narrow down your results, here are some questions to ask before choosing a lender:
- Is a direct or indirect lender better for me?
- Is this lender licensed in my state?
- Do they have a good online reputation with their previous or current customers on sites like Trustpilot?
- What types of fees do they have, if any?
- Which types of loans do they offer, and what are their main uses?
- Does the lender offer competitive interest rates, flexible repayment terms, and a large enough loan to meet my needs?
- What are the lender’s typical application, approval, and funding times like?
- What are the typical eligibility requirements?
- Does the lender offer prequalification so you can check your rates without hurting your credit score?
Narrow down your list of potential lenders until you have three to five options. Then, compare each of your shortlisted lenders and their loan offers to see which best fits your needs. Once you’ve done this, just complete the loan application and await the credit decision from the lender.
If you do not have a lot of time and you need cash fast, consider going with a fast loan direct lender like Jora. Jora offers simple online loans when you need them. Our streamlined application is entirely online and can be completed in minutes. If approved for an online loan, you could receive up to $4,000 as soon as the same day you apply.*
Why Jora Credit?
Certain types of online loans are easier to get than others. This includes payday loans, certain bad credit installment loans, no credit check loans, cash advance loans, and other online loans for bad credit. These loans typically have minimal credit score and income requirements.
One of the most common reasons your loan application might be rejected is that you do not meet the lender’s minimum eligibility criteria. Check your credit score, income, and current debt load to see if these factors could keep you from qualifying for financing. If they are, consider an alternative funding source, such as a friend or family loan or a peer-to-peer loan.
Online loans can either be secured or unsecured. In a secured loan, the borrower must put up collateral — like a vehicle or house — in exchange for funds. Defaulting on the loan could mean losing that collateral. An unsecured loan does not require collateral but might have stricter eligibility requirements.
Emergency loans and other quick loans online are helpful because they’re accessible, convenient, and usually come with fast funding times. You may also have more options when going through direct cash lenders online, especially if you live in a more rural area with fewer financial institutions.
There are several downsides to online loans, though. Some online-only lenders offer limited customer support, so choose one with several contact methods. If the lender’s website lacks protection, you also risk sharing sensitive information on the Internet that could get hacked or stolen.