These days, there’s no need to visit your local bank branch to apply for a loan. If you’ve got access to the internet, you can apply for a loan online through your computer, tablet, or even your mobile phone. Even better: you can get approved for your loan online and get access to your funds within a day or two, and sometimes even faster.
Online loans have become very popular among consumers thanks to their convenience, speed, and easy approval process. Read on to find out why you may want to consider an online loan and how to apply for one.
Can You Get An Online Loan In Canada?
The easiest and fastest way to get a loan in Canada is to apply for an online loan. These types of loans are particularly convenient when an urgent expense pops up and you can’t afford to wait days or weeks for loan approval and funding. With online loans, you can get quick approval and have the funds deposited into your account within hours.
Online loans are typically available from alternative lenders. Their application process is typically quite simple, and all required documents are uploaded via the internet with no need to physically visit a brick-and-mortar location.
Moreover, getting an online loan can be much easier than applying with a bank as they tend to have lower requirements. Many online alternative lenders work with borrowers who have bad credit or poor finances.
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How To Apply For An Online Loan?
To apply for an online loan, follow these steps:
Step 1: Pre-Qualify
Before applying with an online lender, be sure to pre-qualify with multiple lenders first. This will allow you to compare what type of loan you can secure based on your situation. Moreover, the pre-qualification process only requires a “soft” credit check to help the lender gauge your creditworthiness, which won’t negatively impact your credit score.
Step 2: Choose A Lender And Loan Product
From the list of lenders and loan options you have available to you, choose one that best suits your needs and comes with the most affordable rates and favourable terms. Be sure to also compare funding times if you need the cash urgently.
Step 3: Gather All Required Documents
The lender will need specific documents to verify your creditworthiness and identity. You can upload these documents and submit them electronically. This may include a government-issued photo ID, bank statements, pay stubs and other related documents.
Step 4: Complete And Submit The Application.
Fill out the loan application in full and make sure all information is accurate. Read over the application to make sure you understand everything about the loan and your responsibilities, then submit it. You should receive approval shortly after, and the funds will be deposited into your account within 24 to 48 hours (via direct deposit or e-Transfer), depending on the lender.
Document Required For An Online Loan
The documents that are typically required when applying for a loan in Canada include the following:
- Personal Identification Documents – This may include a government-issued photo ID such as a driver’s license or passport.
- Proof of Residency in Canada – The lender may verify this using your driver’s license or they may require additional documentation such as a service bill.
- Proof Of Income and Employment – You may need to provide bank statements, pay stubs, tax receipts and/or a letter of employment.
- Additional Documents – Some lenders may require other pieces of information, such as proof of collateral or a personal guarantee.
- Credit Check Permission – Further, many lenders have credit score requirements. To verify your credit score, you will have to provide permission for the lender to pull your credit report.
Borrow Up To $50,000 Online
What Kind Of Loans Can You Get Online?
You can apply for a variety of different loan types online, though the more common online loans include personal loans and payday loans.
Online Personal Loans
An online personal loan is a type of financing that provides you with a lump sum of money, which you will be required to pay back in regular installment payments. Loan amounts for online personal loans typically range from $300 to $35,000, with terms ranging between 6 and 60 months.
Funds are provided via e-Transfer or direct deposit and payments are typically automatically withdrawn from your bank account. You can choose the payment schedule and frequency, such as monthly, bi-weekly, and weekly.
Online personal loans are accessible to all types of borrowers including those with bad credit. While interest rates may be more expensive than that of a traditional bank, it’s a much more affordable option than payday loans; another type of online loan.
Online Payday Loans
An online payday loan is a short-term financing option for those in need of quick cash but who can’t qualify for a regular loan due to bad credit or poor finances.
Unlike personal loans, payday loans must be repaid in one lump sum rather than in installments. They’re called “payday loans” because the loan amount, plus interest, must be fully repaid by the time you receive your next paycheque, which is usually between 14 to 30 days after taking out the loan.
Payday loan amounts are much smaller than personal loans and typically range between $100 to no more than $1,500. Interest rates for payday loans are among the highest in the lending industry, with APRs as high as 546%. Considering the sky-high costs of payday loans, they’re only meant to be used as a last resort when a financial emergency arises and you’re unable to access other forms of credit.
Cost Of An Online Loan
Your loan cost can be affected by a number of factors including the loan amount, loan term, interest rate and fees. Below is a table that depicts how the cost of your loan can be affected by the interest rate.
| APR | Monthly Payment | Total Interest | Total Cost |
| 10% | $87.92 | $54.99 | $1,054.99 |
| 20% | $92.63 | $111.61 | $1,111.61 |
| 30% | $97.49 | $169.85 | $1,169.85 |
| 40% | $102.47 | $229.66 | $1,229.66 |
Advantages and Disadvantages Of Online Loans
It’s important to understand the perks and drawbacks of online loans before deciding whether or not to apply for one rather than applying with a traditional lender:
Advantages Of An Online Loan
- Convenience. It’s a lot easier to apply for a loan online from wherever you happen to be without the need to physically visit a lender. All documents can also be uploaded and submitted online from the comfort of your home.
- No-obligation estimates. You can get pre-qualified for an online loan without making an official commitment. If you like what you see, you can proceed with the loan application. If not, you’re free to move on with no obligations.
- Easy comparison shopping. It’s easy to see what’s out there thanks to online loan aggregators that pull up a list of online lenders and the loan products they offer right from your computer. You can use the information to quickly compare lenders and loan options side by side to help you decide which loan suits your needs best.
- Other factors besides credit score are assessed. While having good credit can help increase your chances of securing a loan at a low-interest rate, many online lenders also cater to bad credit borrowers. Rather than placing so much weight on credit scores, these lenders will assess your creditworthiness based on other factors, such as your income and assets.
- Help with mounting debt. Some online lenders offer debt consolidation loans that are designed to help lower your overall debt load and make it more affordable and manageable.
Disadvantages Of An Online Loan
- High interest. Online lenders often charge higher interest compared to conventional lenders in exchange for the more lax lending criteria. Be sure to compare rates from several online lenders before applying for a loan.
- Loan scams. Be wary of online loan scams out there. While most online lenders are reputable, there are some predatory lenders within the online lending sphere that take advantage of unsuspecting consumers. Keep an eye out for any lender that guarantees loan approval without at least some verification of your ability to repay.
How To Choose An Online Loan
Before settling on a particular lender and loan product, make sure to do a little due diligence and compare lenders first. Here are a few tips to keep in mind when choosing an online loan:
Consider Your Credit Score
Your credit score is a key metric that lenders look at when deciding whether or not to approve a loan application. Generally speaking, you’ll need a credit score of at least 620 or higher to get approved for a loan, though many online lenders accept scores under this threshold.
Your credit score will also determine your interest rate if you are approved. The higher your credit score, the lower your interest rate will typically be, which will make your loan more affordable.
If your credit score is low, consider taking some time to improve your score to boost your odds of loan approval at a more affordable rate.
Look For Added Fees
In addition to the interest rate, your loan may also come with several fees that the lender may charge. These can include administration fees, early repayment penalty fees, and others. Look at the fine print to find out exactly what additional fees you may be paying when you take out an online loan.
Get Pre-Qualified
Before applying with an online lender, get pre-qualified. Most online lenders will offer ways to get pre-qualified instantly or within a few minutes. To get pre-qualified for a loan, you’ll be asked to provide information about the following:
- Your credit score
- Your job
- Your income level
- Your overall debt
Prequalifying for a loan will help you compare lenders without undergoing a hard credit check, which can negatively affect your credit. Once you pass the pre-qualification phase, you can proceed to the loan application.
Best Online Loan FAQs
Is it possible to get an online loan with no credit check?
Are online loans safe?
Can you get an online loan with bad credit?
How do I get a quick loan online?
Final Thoughts
If you need cash yesterday and don’t want to jump through hoops to get approved for a much-needed loan, an online loan may be the answer for you. With the right online lender, you can get access to the funds you need to cover whatever expense you may have. Just be sure to take a few minutes to do some comparison shopping to pick the best online lender and loan for you.
