How to Get a Safe and Low APR Online Loan

An online loan is a loan that you receive from a bank, credit union or another lending source that operates online or via an app. The specific process on how to apply for a loan online varies depending on your lender. There are a number of different types of loans you can get online.

Unlike other types of loans (like student loans or auto loans), you can use a personal loan for almost anything. Many people use their personal loans to pay off medical debt or fix their vehicles. You can also use a personal loan to fund a dream vacation, do home repairs or consolidate credit card debt. 

What To Consider When You're Loan Shopping

Applying for a loan online is straightforward, but you need to do some shopping around to get the best terms.

Loan Amounts

Each bank has its own minimum and maximum requirements for how much money you can borrow. Make sure the amount you need falls in these amounts.

Interest Rates

In exchange for loaning you money, banks charge interest on your loan that builds over time. Banks list your interest using annual percentage rates (APRs). An APR is the percentage interest that your loan builds over the course of a year. For example, if you borrow $1,000 at 10% APR, your loan builds $100 in interest over the course of a year.

However, keep in mind that the amount you’ll pay in interest usually depends on your credit score. If you have bad credit or no credit, you may end up paying much more than 36% each year.

Lenders That Allow You To Prequalify

Prequalification allows you to see what terms you'll be offered based on your income and credit history without your credit score taking a hit. Not all lenders offer this, but it's a crucial way to make sure the cost of your loan isn't too high.

Once you have terms from a few lenders, you can make use this information to negotiate. After you pick the best one for you, you'll need to accept the terms. At this point, the lender will run a hard credit check.

Benefits of Getting an Online Loan

Online banks have mastered the loan streamlining process. Instead of going to the bank, applying for a loan and waiting for outsourced underwriting, you can apply for an online loan directly from your computer or phone.

Online banks may even use algorithmic application review — which means that you can get a decision on your request in as little as a few minutes.

Online banks also make paying back your loan much simpler. Because you have an account connected with your online bank, most digital banks allow you to schedule your payments from your checking account. This means that you can pay back your loan with as little as a few clicks on your computer or taps on your phone.