Back in the day, securing a loan meant having to visit the bank or credit union in person, talk to their representatives, fill out a huge amount of paperwork, and then wait for an answer.
And while this still remains a preferable course of action for a lot of people who feel safer taking the more traditional route, the fact is that the ability to secure a loan online makes the entire process more efficient and convenient than ever.
However, while you can easily get online loans from CocoLoan, it is important to keep in mind that it is not the same as shopping online, as the stakes are significantly higher. After all, you have to share sensitive information online and trust that the lender will provide trustworthy and reliable services.
On top of that, with the online landscape brimming with numerous hidden threats, it’s understandable for first-time borrowers to lack confidence in the online lending industry. Fortunately, there are a number of dependable online lenders to choose from on this page, where the process is similar to getting a loan from a traditional lender but offers faster processing and more accessibility.
So, we’ll explore the subject a little further by breaking down all the pros and cons of taking out online loans to give you a better understanding of how the industry works.
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What Are The Upsides To Taking Out Online Loans?
The new generation of online lenders is mainly focused on making the lending process as quick and easy as possible. Most of them can even tell you if you have qualified for funding or not within minutes of submitting your application, thanks to the use of automated review systems.
This is in contrast to traditional banks, which will often take days to review your loan application because a representative will need to personally review it. Furthermore, online lenders offer lower service fees because they don’t have the overhead costs that traditional lenders with physical branches have to deal with.
You are also able to benefit from higher loan approval rates with online loans. This is because, while most banks and credit unions will weigh your creditworthiness based on a standard FICO score, online lenders such as those from CocoLoan will utilize other alternative information when reviewing your loan request.
This includes details such as your current income level, debt-to-income ratio, etc. It also helps that most online loans tend to be unsecured, which means that collateral is not required to secure approval either.
What Are The Downsides To Borrowing Online Loans?
If you find yourself in need of an urgent cash loan, taking out an online loan seems like a simple and fast solution. However, this form of credit tends to come with a fair amount of risk that must be considered. Some of the risks you need to be aware of include:
#1. High-Interest Rates and Fees
The biggest risk of taking out an online loan is that they typically come with high interest rates, especially if you happen to have a bad credit history. This is because the interest rate on these loans tends to come at the discretion of the lender, so while securing approval is often likely, it can come at a hefty price.
In addition, there are a number of extra costs to take into consideration. For instance, some online lenders may even charge prepayment fees for paying off the loan too early, which is due to the loss of profit that the lender suffers from the lack of compounding interest.
You may also need to pay origination fees and even a late payment penalty for missing a scheduled repayment, which can often be quite high even with the best types of online loans. It is for this reason that you should always take the time to read the fine print of the loan agreement before e-signing it.
#2. The Potential Risk of Identity Theft
As mentioned before, applying for an online loan typically requires you to submit your personal and financial information. And the problem with this is that if you make the mistake of dealing with an unscrupulous lender, there is a high chance that your private data will be compromised.
It is for this reason that you should only ever borrow a loan via a credit broker service like CocoLoan. These companies will usually vet the lenders within their network to ensure that borrowers do not fall victim to any unscrupulous lenders.
#3. Automated Repayments
Many online loan providers will often require you to set up an automated repayment schedule on your account to ensure that you meet your repayment due dates on time.
However, the problem with this is that if the lender tries to make a debit when there are insufficient funds in your account, this could result in you racking up overdraft fees, which can damage your financial situation even further.
Are Online Loans Really Safe?
The short answer to that question is yes. However, you need to keep in mind that the process is not black and white, as the safety of this form of lending depends on your savviness as a borrower to select the right lender.
It’s not as simple as randomly picking an online lender, without taking the time to conduct the necessary research because there are numerous players out there looking for ways to scam desperate borrowers.
So, whenever you are considering borrowing a loan online, you should make use of credit services like CocoLoan, which can be trusted to connect you to legitimate and honest loan providers. This will not only spare you the frustration of dealing with unpleasant surprises, but it will also allow you to secure yourself the best deal possible.
Tips On Choosing The Right Online Lender
If you want to know whether or not an online lender is legitimate, there are a few reliable ways that you can go about this process to stay safe and also secure the funding that you need.
- Get referrals from friends and family members: Referrals are always helpful because they come from sources you can trust and since they are based on personal experience, this ensures that you have a good idea of what to expect.
- Online research: You can also try to carry out your own research by conducting searches on review sites and also referring to the Better Business Bureau website, where you can find testimonials from past clients. This should enable you to find any potential red flags that would indicate the lender is a potential fraud such as missing contact information, offers that are just too good to be true, being required to pay fees upfront, etc.
- Use a reputable credit broker: There are a number of online platforms like CocoLoan that can be relied upon to help you get matched with the right lender. Most of these services will do all the leg work of verifying a loan provider’s credentials, which ensures that you only receive reasonable loan offers from reliable and trustworthy companies.
In summary, while it is true that the online lending industry still has a few risks and threats to take into account, the fact is that there are still trustworthy lenders that you can rely on.
After all, the presence of a few rotten apples does not mean that the whole bunch needs to be thrown out. However, this raises the importance of choosing wisely, as making the wrong decision can lead you into deep financial trouble.
Always do your due diligence and keep an eye out for red flags because, while banks can generally be trusted, they may not always be a viable option to borrow cash from.