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What is Online Lending & Why You Should Care?

October 11, 2019 by Emma Gordon

What were you doing in the 90s?  

If you needed a loan, you may have been mentally preparing yourself for a long and drawn-out affair. You’d probably have to clear your schedule, make an appointment with a financial advisor, and then actually make your way down to your local bank or credit union.

And all of this was before you even applied! Then you had to wait while the bank reviewed your application with a chance it wouldn’t get approved.

You may have not know any better because there probably wasn’t a different way to borrow.

Nowadays, the search for short term loans is different, and it’s all thanks to online lending.

What is Online Lending?

Online lending, in many cases, makes it possible to skip the bank entirely as long as you have a device that connects to the Internet — whether it’s a tablet, a computer, or even a phone.

The move from bank to device makes it easier, faster, and more convenient to get help when an unexpected emergency strikes. This could include things like having to pay for an unexpected trip to the emergency room, or a vital home repair you hadn’t anticipated. 

The online lending world is run by financial institutions that often don’t conduct lengthy in-person interviews. Instead, they may rely on innovative technology that analyzes applications. 

smiling person in jean jacket and hoodie in front of a table with an open laptop phone coffee mug and books in a busy café

What Are Your Borrowing Money Options Online?

If you borrow money over the Internet, you may be using an online loan. This is a pretty broad definition, so a lot of different products fall under it.

You might be wondering, “How many loan options do I have when borrowing money online”? The answer may be a lot!

With a number of different offers from different lenders out there, there may be too many to count. But we can explore the broadest categories to give you some idea of your options.

Let’s go over some of the biggest types below:

Installment Loans

Depending on a lender, an installment loan may be secured or unsecured. Here, “secured” means you back your loan with an asset or collateral. If you fail to repay your loan according to the terms of your loan, the lender may take this collateral.

Unsecured means you don’t put up collateral or security, so the rates and interest may potentially be higher.

If you’re approved for an unsecured loan, the funds may arrive in one lump sum and is due back by a fixed date, usually over multiple payments, details of which would be outlined in your contract.

If you consider an installment loan, the size of your loan, your repayment terms, plus any interest and/or other fees applied to your account depend on your lender.

In many instances, once you’ve paid off what you owe, you may have to apply for another loan if you need to borrow from that same lender in the future.

Lines of Credit

A line of credit is an open-ended borrowing option, so it operates a little differently from some of the other financial products on this list. Instead of receiving a lump-sum of cash that starts accruing interest right away, you’ll most likely be approved for a set credit limit. You may draw as much or as little of this limit as you need up to your available credit, but you will only start to accrue interest or pay fees on the amount you withdraw. There are also some types of lines of credit where instead of drawing funds into a bank account, you charge purchases to your line of credit.

This financial product may be a more flexible option, as your credit limit may remains available if you pay back the amount you withdrew in full. Once you pay your balance down to zero, you may have your entire credit limit available to use again.

Your credit limit, whether it’s secured, as well as the fees, charges and/or interest, depend on a lender.

smiling woman with blonde hair using tablet with right hand resting on arm of beige fabric couch

Payday Loans

The money you receive from a payday loan is usually due back by the date of your next payday. The funds typically arrive in one lump sum, and you’re also usually expected to pay it all back, plus interest, charges and/or fees, in one lump sum.

Other than the repayment schedule, it shares some similarities with installment loans. But they’re not perfectly identical. Before you choose one over the other, read this to learn more about their differences.

This product works on a faster timeline than many other options, and in some cases, applying does not impact your credit. It’s a small-dollar, short term loan, so it’s a quick way to get money in an emergency.

Due to these unique terms, this financial product may be unsecured. It’s usually best used for unexpected emergencies when you’re short on money.

Peer to Peer Loans

A peer to peer loan is a financial product that eliminates an official financial institution from the transaction. Rather than borrowing money from a bank, you borrow money from your “peers” — that is to say, anyone willing to lend you money.

Cash that comes from a person and not a financial company may qualify as a peer to peer loan (or P2PL). However, P2PLs often refer to a specific way of borrowing money through websites and apps.

You may receive funds from an individual or a group of people who see your request, and the P2PL service will facilitate the exchange of money.

How Long Do Peer to Peer Loans Take to Fund?

Although a P2PL may take a community effort, funding may be quick. ValuePenguin reports that borrowers typically receive funds between 2 and 14 days.

Make Sure You’re Working with a Secure Lending Service

Like any financial product, there are both safe and shady options available. This is why you should thoroughly review any online lender you think about borrowing from.

A reputable online lender should take your privacy and security seriously — whether you’re looking for P2P options or cash advances online.

To make sure you choose a financial institution that has your privacy and security in mind, you should look for a company that:

  • Has the appropriate licenses to lend in your state of residence
  • Employs strict online security measures, including SSL encryption
  • Doesn’t hide fees using complicated language

What Are the Benefits of Online Lending?

There are a lot of reasons why you might borrow money online. Let’s take a look at four of these reasons below:

black and white flip clock on a metal apparatus at 12 am with blurring seconds

1. It may be fast

If you need help in an emergency, the length of the borrowing process from start to finish is important. While many financial institutions will have different procedures, the type of product you choose may have an impact on the turnaround time.

An online loan may be a speedy way to receive a loan when you experience an unexpected emergency, depending on the lender. Some direct cash advance lenders like MoneyKey may review your initial application in a matter of minutes. This means you may know if you’ve qualified for a loan in minutes. If approved, you may receive your cash as soon as the next business day.

2. It can be easy

Being denied a loan is never fun, but it’s especially frustrating when you’re looking for a loan under a time crunch. It means you’ve put in time and effort into something that may not end up helping you. You may be back to square one, potentially weeks later.

Being denied may be a blow to your self-confidence, but it’s not just you. According to LendEDU’s The State of Personal Loans in 2018 report, 76% of applicants were denied for a personal. And the reason? It’s sometimes because of poor credit.

Big mainstream banks may have strict requirements that could include needing a prime credit score at a minimum. This makes getting approved a challenge if you have less than ideal credit.

woman sitting at desk with notebook pen and open laptop screen showing approved

Some online lenders have fewer restrictions, which may give you the opportunity to be approved if you have damaged credit.

Although some online lenders may look at your credit history, it may just be one of many factors they consider when reviewing your applications. Having subprime credit may not disqualify you with some lenders if you have a strong profile in other areas of your application, such as a consistent source of income.

As long as you have the right information and documents on hand, filling out an application can be simple.

3. It can be smart

If you’re looking for an Italian place in town to impress your date, do you choose the first restaurant you find? Probably not!

You may instead hit the web to take a virtual tour of your city using Yelp and other review sites to help you find the best option.

It’s 2019, so a lot of people may follow a similar script regardless of what they’re looking for — whether it’s a 4-star dining experience or a pair of sneakers. So why wouldn’t you invest the same amount of time when you’re looking for loans?

When you borrow money online, rate shopping may be easier to do. Just like applying, researching a variety of products from different lenders can be simple, convenient, and fast. You can open several tabs and flick through them to compare your options side-by-side.

This technique can also be smart. Shopping around may help you understand what products are available for your financial profile, and it may help you find the best options for borrowing money.

man wearing blue checkered shirt writing in notebook with pen in left hand on a table next to an open laptop

Find an Online Loan That’s Right for You

If you’re wondering who can help you determine your borrowing capacity and identify financing options, their reflection is looking back at you in the screen. Only you can decide if an online product is the right one for your needs and situation.

Researching your options is one of the best ways to help you understand what those products are, so you’re in a better position when you apply for financing.

Although the online lending world can be fast, simple, and convenient, it still involves borrowing money. Even the best options may be a burden if they don’t fit your finances or if you use them improperly. For example, using line of credit personal loans to relieve debt is a bad idea, but using it to help in an unexpected emergency may not be.

By doing your homework and figuring out the pros and cons of each product, you may find something that works the next time an unexpected expense surprises your budget.

If your research includes lines of credit or installment and payday loans online, get in touch to find out more about how we might be able to help.


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Not all applications are approved; duration of approval process may vary.

* If your loan is approved before 9:00 PM ET from Monday through Thursday, or before 6:30 PM ET Sunday, the funds will typically be deposited into your bank account the next business day, otherwise, your funds will be deposited into your bank account in two (2) business days. The date and time funds are made available to you are subject to your bank's policies.

Product availability varies by state. To see loan products offered in your state of residence, please visit our Rates and Terms page. MoneyKey – TX, Inc. is licensed as a Credit Access Business (CAB), License No. 16641-62815, by the Office of the Consumer Credit Commissioner and registered as a Credit Services Organization (CSO), Registration No. 20110150, by the State of Texas. All loans for which MoneyKey acts as a CSO and/or CAB are funded by an unaffiliated third-party lender and serviced by MoneyKey.

In the State of California, MoneyKey – CA, Inc. is licensed by the Department of Business Oversight pursuant to California Finance Lenders Law License No. 60DBO43590 and California Deferred Deposit Transaction Law License No.1004516.

Reviews and any ratings referenced are based on TrustPilot reviews. Images are for illustrative purposes only. Reviews reflect individuals’ opinions and may not be illustrative of all individual experiences with MoneyKey.

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