New! Eligible SoFi members can invest in upcoming IPOs before they’re traded on the public market—only in the SoFi app.* Learn more

The Advantages of Online Personal Loans

January 02, 2019 · 4 minute read

We’re here to help! First and foremost, SoFi Learn strives to be a beneficial resource to you as you navigate your financial journey. Read more We develop content that covers a variety of financial topics. Sometimes, that content may include information about products, features, or services that SoFi does not provide. We aim to break down complicated concepts, loop you in on the latest trends, and keep you up-to-date on the stuff you can use to help get your money right. Read less

The Advantages of Online Personal Loans

Personal loan balances have nearly doubled from 2006 to 2018 . While getting approved for a personal loan can be cumbersome and time-consuming, the process has also vastly improved since 2006.

Online personal loans have made these loans more accessible, because they often come with competitive rates and a streamlined application process that can be accomplished from your couch.

These advantages are very appealing to consumers who may have previously had trouble getting a traditional bank loan for the purposes of consolidating credit card debt (to pay it off at a lower interest rate), or funding a large purchase like a wedding or home improvements.

Generally, online lenders offer unsecured personal loans, which means they don’t need to be backed by collateral, such as real estate or business equipment. This isn’t always the case, so it’s always worth shopping around to find the bank—online or brick and mortar—that offers the best loan for your needs. Here’s how to know where to start on the search for a personal loan.

Pros of Online Lending

Competitive Rates

Online lenders are typically able to offer competitive rates because, unlike many big banks, they don’t have thousands of physical bank branches to run. However, some online lenders may try to generate profits via extra fees. When shopping around, be sure to consider all fees when calculating the cost of the loan, including origination fees and closing costs.

SoFi also offers adjustable rate loans that may offer even lower rates than a fixed rate loan. Because adjustable rate loans can result in more interest down the road if rates go up, adjustable rate loans may be a great option if you are in a position to pay back your loan quickly.


Online lenders generally want to disrupt traditional banking, because big banks largely let people down when they need quick access to capital or a streamlined application process that can be done from anywhere. Some online lenders are able to approve personal loan applications within a period as short as a week and minimal hassle.

Different Criteria

Most bank lenders, online or otherwise, require you have good credit to take out an unsecured personal loan. But some online lenders can give credit scores less credence than others, focusing on other markers of financial health such as cash flow and employment history. While most traditional banks will also look at your income and financial history, they generally still prefer to loan to those with excellent credit scores.

Other Perks

Lenders are usually competing for the best customers, and so they’re offering more perks to those their customers. For example, SoFi offers its members Unemployment Protection , where your loan can be put on hold in the event you lose your job through no fault of your own. Even better, we offer career coaching to help you find a new job.

Pros of Traditional Banks

There are Physical Bank Branches

This one is pretty obvious, but if you feel best working with a live, in-person body, then a traditional bank or a credit union is probably ideal. If you have a great, long-standing relationship with your bank or credit union, it may work more in your favor to get a personal loan quote from them; relationships can matter, even in banking.

May Be Easier to Find a Specific Loan Type

If you need a significant loan, it may make more sense to work with a traditional lender that specifically handles the specific type of loan you’re after. For example, if you need a business loan, personal loans cannot be used for business expenses, so you might be better off applying for a small business loan with a traditional bank.

Access to a Line of Credit

A line of credit is different from a personal loan; it is similar to a credit card, where you spend only what you need, and there isn’t an established term, or payoff timeline.

A line of credit allows you to access a set amount of money when you need it—but you don’t have to use all of it. You can use only a portion if you prefer, and you generally only have to pay interest on the portion you actually use. That’s why it might be more appropriate for someone who has more sporadic credit needs.

Access to Secured Loans

It is sometimes possible to get a lower rate on a loan if you use your home or car as collateral. This is called a “secured” or “collateralized” loan, and it comes with additional risk; for example, the bank can seize your property if you fail to make payments.

No matter your goal for the money, it is in your best interest to shop around for the best rates and a personal loan that best serves your needs. The proliferation of online banks is no surprise—they provide consumers with more options.

Before you start your personal loan research, it’s a good idea to set a realistic budget so you can get a better sense of what you can afford and whether or not a personal loan makes sense.

Here’s a personal loan calculator you can use to become familiar with how different interest rates and loan lengths affect both your monthly payments and how much you could pay in interest over time.

Ready to see if a SoFi personal loan can help you achieve your next financial goal?

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website on credit.
The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.


All your finances.
All in one app.

SoFi QR code, Download now, scan this with your phone’s camera

All your finances.
All in one app.

App Store rating

SoFi iOS App, Download on the App Store
SoFi Android App, Get it on Google Play

TLS 1.2 Encrypted
Equal Housing Lender