With the advent of the digital world, individuals and small businesses are meeting their financial needs online. From business transactions to individual accounts and online loans, the time-saving factor of online banking, and the ability to access financial records 24-hours a day, has seen a rise in the digital-based system over face-to-face service.
Online loans have become one of the fastest growing aspects of online-banking. With the click of a mouse, applying for a business or personal loan is a relatively simple process with most banking institutions able to grant loans – based on current financial records – within a short time-frame. The consumer must remember that when applying for an online loan, they are subject to the same credit criteria – applications for online loans simply cut out the middle-man.
Small business will need to provide a business plan (with earnings potential), business assets, a customer-base, and how the business loan will increase the earning capacity. A more detailed business plan will increase the chance of securing a loan.
For small business owners, online loans are secured to help expand their business, or to finance a certain side of it. Most financial institutions have a minimum loan amount–usually $5,000–and offer flexible terms with differing interest rates (eg. fixed term, variable, capped). Small business owners should be aware that business loans generally attract a higher interest rate than home loans, for example, as they are a less secure.
Institutions that provide personal loans have increased dramatically in recent years; not all of which are major banks. Online loans for individuals (or personal loans) attract the same interest rate options ie. fixed, variable, capped, secured and unsecured.
A secured loan means the financial provider effectively “owns” the asset until the loan in repaid; for instance car, boat or equipment purchases. Unsecured loans generally cover expenses such as holidays, debt consolidation and renovations.
Interest rates of personal online loans will differ from institution to institution, and it is recommended that the client to make comparisons before deciding on which financial establishment best suits their needs.
As with both small business loans and personal loans, fees (established and ongoing) will be a major factor in this decision. While one institution may have a lower interest rate, their fee structure may mean repayments are increased. Fees typically include: establishment fee, account keeping fee, exit and redraw fees.
With an online loan, these fees should be clearly stated in the application form to provide the consumer with an informed choice.
The advantage of online loans is the ability to search quickly and efficiently. All financial lenders have an online presence, it is this availability that allows online loans to be a user-friendly and advantageous way to secure financial backing for your small business, or to search for the best personal loan on the market.