If you need some emergency cash to go for a vacation or pay an emergency medical bill, going to the bank and waiting for their mercy is a thing of the past. In this digital era, people can apply for online loans through various websites and mobile applications where they provide quick and easy unsecured loans. These online loan opportunities come with numerous benefits and risks, which you should be aware of beforehand. Let me explain some in detail for you.
How does online loan websites work?
An online loan website is a financial marketplace where numerous lenders and borrowers buy and sell financial products. Both lenders and borrowers need to register in the portal by giving their personal, professional and financial details, which will be verified for authenticity. Through the website, borrowers can search for lenders, compare various loan offers, and choose the best. Lenders can showcase their financial products and explain their terms and conditions through the website.
Once a borrower finalizes on a particular loan offer, he can apply online by filling in some financial details and uploading documental proofs to avail the offer. The portal will analyze his credit worthiness using complex algorithms and decide if he is eligible for the loan. Once approved, the loan amount will be credited to his bank account. Customer service professionals will be available 24 x 7 to assist with the process.
The website acts as a virtual office, providing relevant information about lenders and borrowers to facilitate the decision making process. The portal does not guarantee any returns for the lender or if the borrower will receive any loan from lenders. The portal collects service charge from both the lender and borrower for the services offered.
What are the types of loans disbursed though an online loan portal?
1. Payday loans
Payday loans are short term, small amount loans with high interest rates that need to be repaid on your next payday.
2. Installment loans
Installment loans pay borrowers a fixed amount of money, which they have to repay as equal monthly installments, until the loan is fully paid off. The installment includes monthly interest and a portion of the principal amount. Installment loans are commonly long term, big amount loans with average interest rates.
3. Line of credit loans
Line of credit loans provide a credit limit that can be borrowed as needed, repaid and borrowed again to meet needs. Funds are accessible anytime without exceeding the maximum credit limit. The rate of interest and repayment conditions is set by the lender.
Documents and details required for online loan application
- Identity proof
- Address proof
- Income proof
- Personal data (email ID, phone number, age)
- Income data (gross income, net income after tax deduction, employment information)
- Banking data (bank name, account number, PAN number)
Benefits of online loans
- Easy online application
- Quick processing without human intervention
- Unsecured or collateral-free loans
- Can compare offers from various lenders
- Competitive interest rates
- High disbursal amounts
- Loan approval even for persons with low credit scores
- Flexible repayment tenure
- Loan top-up facility
- No need to visit a physical location or mail in any documentation.
- Apply for loan anywhere, anytime from website or mobile app.
- 24/7 customer support
Risks of online loans
- Possibility of data leakage
- Beware of hidden costs
- Compare processing fees and interest rates before choosing
Online loan processing steps (Borrowing)
- User registration
- Browse through various lending offers
- Select loan amount and tenure
- Complete application and upload documents
- Online credit assessment
- Electronically sign documents after loan approval
- Direct cash deposit in bank account
- Repayment of loan through the portal