How it works
Before the internet, if you needed financing to buy new furniture or replace a broken appliance, your only option was going to a bank or your local store to fill out a paper application. But thanks to secure technology, the financing process is digital and broken into three simple steps:
- Apply - Quickly and easily complete an application online, no paper forms needed.
- Get approved - Find out if you're approved within just a few minutes.
- Shop - Get access to a network of thousands of vendors for all sorts of products.
Types of online credit financing
Now that you understand how it works, it’s important to understand the different kinds of funding available. Here are some of the most popular types of online credit financing.
A personal loan is considered an “unsecured” debt because it’s not secured by any sort of collateral. Your credit score is used by lenders to determine your approval for a personal loan and interest rate. Interest rates for personal loans range from 5% to as high as 100 to 200% or more if you have poor or no credit.
Abbreviated as P2P, peer-to-peer lending is where online lenders pool their funds and are matched with borrowers who need money for individual or business purposes. The interest rates for P2P loans can range from 6% to 25%, not including origination fees of around 5% of the total loan amount.
A title loan is a quick way for vehicle owners, to leverage their vehicle title for much-needed cash. If you have a clear title, you can use it to get the funds you need. These short-term loans can have very high interest rates, up to 36% or more for the 15-30 days that the loan is active.
Much like a title loan, a payday lender will use your next paycheck as a form of collateral to approve you for a payday loan today. You can receive money now with the promise to pay it back with your next paycheck. The average weekly or biweekly fee for a payday loan ranges from $10-30 for every $100 borrowed, which can equal 520% APR or more.
Due to the immediacy of money, payday loans can be a quick answer to a short-term problem. But borrowers can get stuck in a cycle of renewals with payday loans. Be cautious when using a payday loan, the interest and fees can be difficult to get out of.
Is online credit financing secure?
There are several options for online financing, but is it secure? The short answer is, yes! There’s no guarantee that anything you do online is completely safe. But there are certain steps you can take to ensure that your digital financing application is secure.
Look For The "Lock" Icon
When a website deals with personal information, passwords, and sensitive financial information they are required to have a secure connection. This is commonly displayed in the top left-hand corner of the site, next to the web address, with a little “lock” icon.
If the icon is green, then you know the website is completely secure and you can proceed with confidence. If the “lock” icon is red or missing altogether, do not share your personal info as the website may be not fully secure.
Don't Use Public Wi-Fi
It’s easy to sit in a coffee shop or library and start surfing the web using their free Wi-Fi. But be cautious when using public Wi-Fi. Save any finance-related work until you get home with a secure Wi-Fi connection. That way your bank and personal information won’t be compromised.
Experts agree that reputable financial institutions and loan providers with online platforms are secure, due to the bank-level security measures in place.
In 2019, cybersecurity breaches at major financial institutions were down 25% due to new security precautions put in place. And according to Forbes, 73% of American access their bank accounts online or through a mobile app. When following these steps, you can apply for online financing with confidence:
- Create strong passwords
- Enable two-factor authentication
- Set up banking alerts
- Be wary of phishing scams and emails
- Choose reputable banking apps
What you need to apply for financing
When you’re ready to apply for financing online, you’ll start the first step by entering your personal information. This commonly includes the following:
- First, middle, and last name
- Current email address
- Phone number
- Social Security number
- Physical address
- Date of birth
- Driver license number
- The names of two references
- Employment information
- Previous addresses lived at
In addition to this information, you must be at least 18 years or older, with proof of a steady income and checking account to finish the application process. Once you’re approved for online financing, affordable payments can be automatically deducted from your checking account. This makes it easy to make on-time payments so you can avoid late fees.
When applying for online financing make sure you take the time to read and understand the fine print. Most reputable finance companies, like Snap Finance, share their terms and conditions upfront, so you don’t have to question any hidden costs. Still, it’s important to know everything that’s involved before signing on the dotted line.
Financing can include these types of fees:
- Application fee or processing charge
- Interest rates
- Late fees
- Missed payment or non-payment fees
- Final payment or payoff charges
- Other miscellaneous expenses
If you’re unsure of all the fees when applying for a loan online, don’t be afraid to contact customer service to ask questions. They’re there to help you feel comfortable with the online financing process.
How it works with bad credit
If you have bad credit or no history of credit at all, it’s a good idea to seek out online financing from lenders who don’t pull your credit report. Not only can this reduce your chances for approval, but it can ding your credit as a hard inquiry.
Is online credit financing right for me?
If you’re in need of new appliances, furniture, or tires for your car, then online financing could be right for you. There are other loan options, but many require a good credit score to avoid high-interest rates. If this is the case, then online financing is often a much better choice.
The content of this article is for informational purposes only and should not be construed as personalized legal, financial, or other advice. This article represents paid promotional material provided by or on behalf of Snap Finance, LLC, or its affiliates.