Pros and cons of getting personal loans online

Peter Warden
Peter Warden
The Mortgage Reports Editor
July 30, 2019 - 4 min read

Should you shop for personal loans online?

In a word, Yes. Or, at least, maybe. Shopping for the lowest cost loan is an absolute must when you’re about to borrow. Whether you compare deals on personal loans online is up to you. You could always try the old-fashioned way.

*TheMortgageReports and/or our partners are currently unable to service the following states - MA, NV

Shopping wins you bargains

Think of it in the same way as if you were shopping for, say, a new TV. First, you research the model you want, checking reviews. And then you can cruise around all the department stores and other appropriate outlets at various nearby malls to find the lowest price. And then you drive to your local high-street electrical stores. Finally, you drive back to the retailer with the cheapest one to buy your new television. Nothing wrong with that.

But you could just shop online. You’re likely to get just as good a price on the same model in just a few minutes. And you can do it in the comfort of your own home. In your pajamas, if you want.

Of course, if you have a favorite local store, you could always call it for its best price. You could even haggle, using the best price you found online as leverage.

And that’s how shopping for personal loans online works. You’re less likely to pay too much. And it’s incredibly easy.

*TheMortgageReports and/or our partners are currently unable to service the following states - MA, NV

Pros of shopping for personal loans online

1. It’s an easy and convenient way to get the best deal

Depending on how much you’re borrowing, you could save more by shopping around for the best loan deal that by tracking down a bargain TV. And you wouldn’t buy expensive new electrical stuff without checking out various retailers’ prices first, would you?

If you’re going to comparison shop, online is the easiest way to do it. Of course, you can still call your existing bank or credit union to see how cheap its offering is. Just pick the one that’s going to cost you least.

2. Can you receive funds faster online?

One of the great benefits of a personal loan is that you typically get your money really quickly. If yours is a straightforward application, you’ll usually have the funds in your checking account within one business day — sometimes on the same day you apply.

Those borrowing very large sums may wait a bit longer. And the same applies if you have a complicated history. But it’s rare to wait more than a week.

3. You’re unlikely to hurt your credit score

You may have read that your credit score takes a small hit whenever you apply to open a new account. And that’s true, although any damage done is quickly repaired once you start making on-time payments.

But, initially, online “applications” are actually just requests for quotes. And those typically involve “soft” credit inquiries, meaning they don’t affect your score. Only when you actually pick a quote and make a single, formal online application should your score be affected.

4. Open to all — well, nearly all

Your loan will grow more expensive the lower your credit score. That’s pretty much an iron rule.

But lenders tend to specialize in more or less creditworthy customers. So you can likely find a loan, even if your score’s disappointing. Of course, it’s always hard to borrow when you have a disastrous score and can’t prove your problems are behind you.

*TheMortgageReports and/or our partners are currently unable to service the following states - MA, NV

Cons of shopping for personal loans online

1. You’re borrowing from whom?

Chances are, you won’t of heard of some of the companies that send you quotes. But how worried should you be by that?

Well, let’s not panic. You’re going to get the lender’s money — not the other way around.

But you’re right that some lenders can be shady or even predatory. So check out online the ones you’re considering. Do a search of your lender’s name to see basic details. Then search again, adding the words “reviews” and “complaints.” That should let you discover what its customers and professional reviewers make of it. And, finally, check it out on the Better Business Bureau’s website.

2. Not all the best deals are online

You’ll often find the best deals online. After all, online-only lenders don’t have huge branch and staffing infrastructures to pay for. So they can afford to be competitive.

But your bank or credit union might have something even better waiting for you. So, by all means, call it (and anyone else you think might help) to see. The more quotes you get, the better.

3. Personal loans not always the cheapest form of borrowing

It’s almost certain that a personal loan will be way less expensive than borrowing on your credit cards. But, if you’re a homeowner whose home’s market value is way higher than your current mortgage balance, you may have a yet cheaper option.

You could consider a home equity loan or home equity line of credit. However, these have their downsides:

  1. You’re putting your home on the line — Foreclosure’s a real possibility if you fall behind with payments
  2. These are second mortgages — So applying for one comes with similar administrative headaches and eyewatering expenses to those you experienced with your existing mortgage
  3. That intense setup process is also long — Expect to wait several weeks for your money
  4. Those high setup costs make these loans suitable for borrowing only large sums

Home equity loan vs line of credit (HELOC)

Shop till you drop? Not any more

Finding great deals on personal loans online takes only a few minutes. Simply answer a few questions and wait for your quotes to roll in. And you can do it from the comfort of your bed, couch or home office. Indeed, you can even do it when you’re not at home using your smartphone.

*TheMortgageReports and/or our partners are currently unable to service the following states - MA, NV

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