Since the near global collapse of the financial and banking industry in 2008, the rates of personal, household, credit, and financial debt has been increasing exponentially. If there is one thing that Americans seem to know how to do very well now, it’s to mire themselves in ever increasing amounts of debt. Banks and the financial industry, which are beginning to lend to consumers again at increased interest rates, are not helping the situation.
The Cost of Easy Loans
Americans owe about $1.3 trillion in consumer debt. The average person owes about $16,000 in credit card debt. The average mortgage debt can be as high as $170,000. Most Americans take out car loans that exceed $30,000. The average student loan debt per person is a little over $50,000. Any way that you look at it, Americans have problems with amassing debt and then struggling to pay it off.
Over 50% of Americans are not ready to deal with any life-disruptive, financial emergencies. Too many live check-to-check. The Federal Reserve estimates that collectively, Americans owe over $12 trillion in various forms of household and personal debt. Americans usually end up creating more debt to pay off existing debt, exacerbating the problem. Since the 2008 global financial crisis, credit cards are the easiest way to pay off debts for some people.
While it is still possible to apply for a traditional bank loan, it is a time intensive process for people who need money quickly. However, in the 21st century, it is now possible to apply and qualify for a quick online loan. Whether that is a good or bad thing depends on how fast you need money.
Understanding the Online Loan Process
An online loan is the digital, online version of a traditional loan. You must go to a bank or credit union to apply for a traditional loan, fill out paperwork and endure an interview. Then wait weeks or months for a decision. The online loan process occurs entirely online via the use of financial technology, also known as fintech. An online lender is a private financial institution or individual that lends money through a third-party website as a facilitator.
To apply for an online loan, you will have to submit all of your information online. You will have to provide information about your residence, your current employment, your credit score, how much money you make, and your bank account information. Online lenders use fintech to determine your creditworthiness and risk as a potential applicant. You can borrow a few hundred dollars or a few thousand. If approved, funds can be transferred into your bank account within hours or a day at the most.
Convenience for Whom?
There are a few things you should understand about an online loan before applying for one. For one thing, an online lender is not beholden to federally applicable laws like a traditional bank or credit union. Interest rates can range between 5% and 36% for the more legitimate online lenders. That is why you should only apply for an online lender who assesses credit history. Online lenders who do not care about your creditworthiness can charge exorbitant interest fees far above 36%. (Some unsavory online lenders can charge over 1,000% interest for more desperate applicants.)
You should have money saved already to guard against overdraft fees. An online loan is automatically deposited into your bank account. Per the approval agreement and contract, a date will be set by the lender for automatic withdrawals to begin. These will usually occur the day of or after a payday. You must know this schedule so that you have sufficient funds to satisfy the repayment schedule.
Depending on the online lender, you might get hit with large penalties for late or missed payments. If you don’t use a repayment strategy based on your payday schedule, and stick with it, you may end up in a bigger debt hole than before you applied.
Consider Fast Online Loans Carefully
Don’t apply for an online loan lightly. You are basically giving an online lender the right to deduct money from your bank account to pay back a loan on their own beneficial terms. An online loan should be a last resort option and used as a short-term debt management strategy. Not as a primary way to get money quick.
- Alternative Ways to Tackle Debt
- Creating a Plan to Pay Off Your Debt
- Here Are Some Tips To Help You Stop Destroying Your Credit Score
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