What you need to know about borrowing money online.
Borrowing money online might feel a bit different to applying in person, but at the end of the day it’s much the same. You have similar loan options and repayment terms, a selection of offers to compare and even the same lenders to choose from. The main difference is that going online is much more efficient and convenient, as long as you know what to look for.
Compare a selection of loans you can apply for online
What options do I have if I want to borrow money online?
You have a range of options to choose from when you borrow online:
- Unsecured personal loans. These are loans offered on the basis of your credit history and financial situation. Because they are not supported by any kind of tangible asset, unsecured loans typically have higher interest rates than secured loans. Unsecured loans can be small loans of between $100 and $5,000, or larger loans of up to $80,000 or higher.
- Secured personal loans. This is when you take out a loan using some kind of asset, such as a car or property, as collateral. You can either use the secured loan to purchase this asset or you could already own the asset. In the event of default the lender will take possession of the collateral. This makes it less risky for the lender, which translates into lower rates and fees for you.
- Short-term loans. These are small loans taken out for short periods of time, usually between 16 days and one year. Also known as a payday loan or a cash loan, the purpose of a short-term loan is to offer a relatively small amount of money very quickly and with minimal credit score requirements. The interest rates on these are usually much higher than on other loans, with fees of 24% of the borrowed amount charged for loans under $2,000 with a one month loan term.
- Bad credit loans. Someone with a bad credit history might have difficulty finding a loan, but this is where bad credit loans come in. These loans come with flexible eligibility criteria with approval being based on whether or not you can afford the repayments. This is determined by your income, employment, assets and debts. They typically have higher interest rates and fees than other types of loans, to offset their less-stringent application requirements.
- Peer-to-peer (P2P) loans. Also known as marketplace lending, this type of loan lets you borrow money without going through a bank or typical lender. The P2P lender acts as a facilitator, with investors providing the loan funds to borrowers. When you take out a P2P loan the interest rate will usually be based on your credit score. Getting a P2P loan online typically means lower interest rates than with other lenders, but the precise terms and conditions vary a lot, and the requirements may be strict.
How can I find a loan online?
The first step is deciding what kind of loan you need, and the second is comparing your options. Comparing your options is easier to do online as you can see the features and costs of multiple loans, side by side. To work out what kind of loan you need, consider the following:
- Do you have good credit and want a large loan ($1,000 to $50,000) with no collateral? Compare unsecured personal loans here.
- Do you have good credit history and want to put up collateral to get better interest rates on a big loan? Check out secured personal loans online.
- Do you need a short term loan (of up to $2,000)? Explore your options here.
- Are you self-employed, have a poor credit history or otherwise can’t provide all the right documentation, but still need a loan? Search for low doc loans online.
- Do you have a good credit score and are in a stable financial situation? Find out how to get a peer-to-peer loan online.
What are the benefits of borrowing money online?
- Quicker applications and approvals. Online lenders tend to offer faster loan application processes and many offer same-day turnaround.
- Apply at any time. You don’t have to wait till business hours to compare your loan options or to submit your loan application. Apply when it’s most convenient for you.
- Easier to compare. Going for a loan online lets you view many of the lenders available and compare them all to find a good deal. It also makes it easier to find the right kind of loan, whether you need a small, short-term or large personal loan.
What will borrowing online cost?
As always, the total cost in interest and fees of borrowing money online depends mostly on what kind of loan you have. Find out where you can borrow money below.
| Loan type | Typical fees | Typical interest rates |
|---|---|---|
| Unsecured personal loan | $100-$350 depending on the size of the loan | 10-15% p.a. |
| Secured personal loan | $100-$350 | 7-13% p.a. |
| Short-term loans less than $2,000 | 4% monthly fee, 20% establishment fee | (fees charged as a percentage of your principal) |
| Bad credit loan | $100-$200 | 11-16% p.a. |
| Peer-to-peer loan | $0-$200, or a set percentage of the loan | 5-15% p.a. |
These numbers are a rough guide only, and some lenders or loans may have higher or lower fees and rates. Some also offer other benefits to justify higher fees, such as:
- Flexible repayment terms
- Good service and ease of use
- Added convenience
- Fixed rather than variable interest rates
How can I apply for a loan online?
Once you know what type of loan you need, borrowing online is a straightforward process.
- Compare your options and click “Go to Site” when you find the right lender for you.
- Fill out the loan application form provided online, and submit it. You can usually do it all on the website without needing to print anything out.
- Wait for an answer. Many online lenders will get back to you with their decision in under an hour, so you generally don’t have to wait long.
Frequently asked questions
Am I eligible for an online loan?
Eligibility criteria differs between lenders. Usually, you’ll need to be over the age of 18, an Australian permanent resident and receiving a regular form of income. You can still find online loans if you’re unemployed, a temporary resident or if you work casually.
How long does a loan take to be approved?
Some lenders can respond within 60 seconds and others will approve you within the hour or the same day. Where extra verification is required, or with some banks, the process can be a few days or even weeks.
Why do I need to provide my Internet banking details?
Some lenders, usually those offering short-term loans, require your Internet banking details so it can quickly check over your financial situation and deposit money directly into your account. The lenders themselves do not access your account, but rather use a secure third-party company to read only the information they need. Your information is not stored and the entire process is encrypted and secure.
What happens if I’m late in paying back a loan?
If you’re unable to make a repayment on time you should get in contact with your lender immediately. Many lenders offer repayment plans and will work with you if you advise them beforehand. If you don’t and the payment is missed you may be charged a late fee or it could be listed on your credit file.
What’s the difference between fixed and variable interest rates?
Fixed interest rates are set at a certain amount for the duration of the loan term, and the size of each of your repayments will generally not change. Variable interest rates are not fixed, and might go up or down over the duration of the loan term, increasing or decreasing the amount you have to pay.
What if I have a dispute with my lender?
If you have a dispute, you should first contact your lender to try to resolve it. If that fails, you can go to the credit and investments ombudsman.
