Online lenders can make applying for and securing a personal loan easier than working with traditional lenders. The process of getting a lump sum of cash to use however you wish can be fast, affordable, and convenient. However, there may be some times that a traditional lender is a better option. Learn the full story here.
Key Points
• Online personal loans offer a fast, convenient application process that can be completed from anywhere with internet access.
• Many online lenders provide competitive rates due to lower overhead, but it’s important to compare APRs to account for any fees.
• Some online lenders have flexible approval criteria and consider more than just credit scores.
• Funding is often faster with online lenders, making them a good option for borrowers needing quick access to cash.
• Traditional banks may still be preferable for those who value in-person service or already have an established banking relationship.
Convenience
The convenience factor is one of the biggest advantages of getting an online personal loan. Younger generations of consumers might be drawn to a process that incorporates the technology they’ve grown up with and are comfortable using. But online lenders often have a streamlined application process that might appeal to people of any generation who are comfortable with technology.
Online loan applications can be completed from anywhere a prospective borrower has an internet connection, preferably secure. In addition, online lending websites often have thorough lists of Frequently Asked Questions (FAQs) to give consumers as much information as possible without the need to travel to a brick-and-mortar bank branch.
Competitive Rates
The lack of brick-and-mortar locations is one key reason why online lenders can often offer competitive rates on personal loans. Without physical bank branches to maintain, their overhead is likely to be less than a traditional bank’s.
Some online lenders, however, may try to generate profits by charging fees, such as those for paying off a loan early. When shopping around for personal loan rates, you’ll want to be sure to compare annual percentage rates (APRs), which includes any fees. This allows you to compare loans apples to apples.
Recommended: APY vs Interest Rate
Quick Turnaround
Some online lenders are able to offer preapproval to prospective borrowers with just a soft inquiry on their credit report that won’t affect their credit score. One benefit of knowing quickly what rate might be offered is being able to compare rates among multiple lenders to find the one that will be the best fit.
After the application and loan approval, some online lenders distribute loan funds in as quickly as one to a few days. You may even see some lenders advertising same-day approval and disbursement. For people who need access to funds quickly, this could be the determining factor in choosing a lender.
Recommended: What to Know Before You Borrow Money Online
Differing Criteria
Someone who has not built a credit history might have difficulty being approved for a personal loan. Some online lenders, however, are willing to look at factors other than credit score in determining approval for a personal loan and may have more flexible qualification criteria than a traditional bank.
There are also some online lenders that cater specifically to underserved populations.
Recommended: Typical Personal Loan Requirements Needed for Approval
What About Traditional Banks?
Even though online lenders are well established in the financial world, traditional banks still make sense for some people or some financial needs.
For people who prefer working with a lender in person, a traditional bank or a credit union can be a good choice. If there is already a relationship in place with a particular financial institution, it may be advantageous to build on that and get a personal loan rate quote from that lender.
In some situations, a personal line of credit (LOC) might be a better option than a personal loan. Though online lenders are beginning to offer LOCs, they are more likely to be offered by banks or credit unions.
💡 Quick Tip: Choosing a personal loan with a fixed interest rate makes payments easy to track and gives you a target payoff date to work toward.
From Disrupting to Redefining
Online lenders and traditional financial institutions are realizing that they can meet the needs of more consumers if they work together. Today’s modes of banking may be less about disrupting the status quo of lending and more about finding a new definition of banking as a whole.
Recommended: Guide to Unsecured Personal Loans
The Takeaway
If you’re thinking about taking out a personal loan, the great news is that you have plenty of lenders to choose from, including traditional banks, credit unions, and online lenders. Some people may prefer the in-person experience of working with a traditional bank or credit union. Others may find that online personal loans can make it easy to rate-shop and typically offer a quick and convenient application process. Online lenders also tend to be faster to fund than traditional institutions.
Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. See your rate in minutes.
FAQ
Is it better to apply for a personal loan online or in person?
It’s a matter of personal choice whether to apply for a personal loan in person or online. Some people may prefer the face-to-face interaction and support of applying in person. Others may like the speed and convenience of applying online.
What are the cons of online lenders?
Some people may feel the cons of online lenders include having to share sensitive financial information online and not having in-person support.
How long does it take to get an online personal loan?
Online personal loans can often be obtained in just a day or two. Some lenders even advertise same-day approval and disbursement.
About the author
Julia Califano
Julia Califano is an award-winning journalist who covers banking, small business, personal loans, student loans, and other money issues for SoFi. She has over 20 years of experience writing about personal finance and lifestyle topics. Read full bio.
SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.
*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.
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 .
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
SOPL-Q225-094