Online Loans vs. In-Person Loans: What’s the Best Option?

We’ve all felt that unexpected financial pinch, whether it’s from a car breakdown, a necessary home repair or a costly medical emergency. A personal loan can help get you out of a bind until you’re back on your feet. But these days, you have a couple of options when it comes to getting a personal loan: 1) Visit your local bank and apply for a loan in-person, or 2) Apply for a personal loan online.

In-person bank loans are the more traditional option, but online loans have become increasingly common. Here are a few key considerations to help you understand the difference.

In-person Loans: All About Personal Interaction

The process for getting a personal loan at a bank hasn’t changed much over the years. In order to apply for a bank loan, typically borrowers would need to physically go into a bank or credit union branch to meet with a representative and fill out the personal loan application forms.

There can be advantages to having a relationship with the bank, and some people prefer this high-touch approach to getting a loan. The bank representative can walk you through the process and answer your questions real-time, however you may need to make an appointment first.

On the downside, dropping everything for a lengthy bank branch visit may be inconvenient for your busy schedule.

Also, applying for a loan in this way makes it tough to shop around and compare interest rates, since you would need to apply at several banks in order to see what your rate would be with each. Applying with a bank also typically requires a hard credit inquiry, which can impact your credit score.

Online Loans: Fast and Convenient

If you prefer to apply for a loan from the comfort of your home, an online loan may be the better option. Simply searching for “online loans” or “online personal loans” will produce a number of options, or you can use a loan aggregator that allows you to check your rate with multiple lenders at once. One benefit of online loans is you can easily compare the rates and terms from different lenders and choose the best deal.

Borrowers also appreciate how quick and easy the application and funding process can be. Many online lenders offer easy to understand online loan applications that can be completed in just a few minutes. If you’re approved, funds are typically transferred into the bank account of your choice within just a few days.

But online loans aren’t for everyone. For one thing, while many online lenders have customer service representatives available to answer questions, you may feel more comfortable walking through the application process in-person with a bank employee. And if you belong to a credit union, you may be eligible for special member-only rates and options. 

And finally, you may feel uneasy about sharing sensitive information through an online platform. The next section will explore whether those fears are warranted.

Are online loans safe?

To apply for an online loan, you’ll need to provide personal information like your name, address, banking information and social security number. You may also need to upload documents that verify your employment and address.

Providing sensitive information online can be nerve-wracking, so you’ll want to confirm that the lender’s site is secure before you enter any info. A secure website is denoted by a lock icon in your browser's URL bar and an “https” instead of “http” in the URL address. A secure website will help ensure your confidential information stays that way.

You’ll also want to do a little research to make sure the online lender is legitimate. Start by searching for customer reviews online to determine if there are any red flags. Check out the website to make sure it includes a physical address and phone number, as well as online support options like email or a chat function if you have questions or concerns in the future. Reputable online lenders will also be upfront with their loan offers, disclosing rates, terms and conditions, and any fees associated with the loan.

Finally, take the time to figure out if you’re dealing with a lender or a loan aggregator. Legitimate loan aggregators can be helpful, since they serve up multiple loan options from varying lenders. But some loan aggregators can look like lenders, which is misleading at best. The disclosures at the bottom of the site should tell you whether it’s a loan aggregator or lender. And if clicking a link sends you to another site with much higher rates, it’s probably a sign you don’t want to proceed.

When in doubt you can always contact your state’s attorney general to double-check that the lender is legitimate. All lenders and loan brokers must register with state agencies when opening their business. 

Warning Signs of a Scam

With many American families feeling an extra financial burden from the pandemic, scam lenders and loans continue to climb. A recent Federal Trade Commission (FTC) article highlights the most common scams coming out of the pandemic — and how to stay vigilant so you aren’t a victim. Key points include:

• The government will never call to ask for your personal bank information, credit card details or Social Security number.
• Never make a payment by putting money on a gift card or wiring it to an account.
• Any request to make a payment via cryptocurrency is a scam. Cryptocurrency has no legal protection and no transaction record, unlike a credit or debit card.

The FTC provides guidance about what to do if you are scammed and offers an option to learn more about potential scams in your area.

Remember if you are not sure about the legitimacy of the site, you can seek out independent customer reviews, and check for disclosures at the bottom of the site — if it doesn’t have any, it might be a scam.

Online or In-Person Loans?

It’s critical to do your homework when shopping around for loan options — and equally important to know yourself and your comfort level.

If you are most comfortable applying for a loan in-person with a bank representative, then opting for an installment loan at your local bank or credit unit may be the right option for you.

If you’re comfortable with managing the process online while having the ability to speak with a representative through chat or over the phone, an online loan can offer a few advantages like and a faster funding timeline. A little bit of internet research will help you find and vet the right lender online.

The content provided is for educational and informational purposes only and does not constitute financial or legal advice. RISE is not acting as a credit counseling or repair service, debt consolidation service, or credit services organization in providing this content. RISE makes no representation about the reliability or suitability of the information provided – any action you take based on this content is at your own risk.