The Benefits of Online Loans

Written By Jeff Hindenach
Last updated January 28, 2021

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November 30, 2016

Simple. Thrifty. Living.

In the past, if you needed a loan for your car, home improvements or to consolidate your credit cards, you would need to get dressed up and head down to the bank to beg for money. The Internet has made things a little easier. Online personal loans are now available to make the hassle of getting a loan a little easier, and peer-to-peer online personal loans services are even changing the way that people lend and borrow money.

The popularity of online loans has been rampant, with the best online loan sites providing billions of dollars in loans, mostly due to the convenience factor, but also the unusual way that some of the services are structured. Peer-to-peer online personal loan sites take advantage of the crowd-funding boom to allow everyday people to invest their money in others’ debt by using one of the best investment companies. Borrowers post their desired loan amounts and individual investors can then fund a portion or all of the loan amount and collect on the interest accrued from the loan.

This allows for everyday people to make money on loans, but what are the benefits for those applying for loans?

Best Online Loan Companies of 2019

RankOnline Loan ServiceBest ForInterest RatesExpert Rating
1SoFiOverall Loans4.25%-7.75%★★★★★
2Upstart LoansApproval Chances8.36%-29.99%★★★★★
5Best EggGood Rates5.99% to 29.99%★★★★★
3CashAdvance.comBad Credit14%-1564%★★★★
4OnDeckBusiness Loans9.99%★★★★

Best Online Loan Companies of 2019

RankOnline Loan ServiceExpert Rating
2Upstart Loans★★★★★
5Best Egg★★★★★★★★★

You would think people would be more inclined to trust the banks instead of an online lending service. So why are so many people putting their trust in online loans? There are a couple of major reasons:

Convenience: One of the main reasons people are flocking to online loans is the convenience. You easily apply for a personal loan from the comfort of your own home. Just fill out the online form and get approved quickly. All of your dealings with your lender happen exclusively online, which makes it convenient for those who don’t want to make the extra trips to the bank.

Lower rates: Since online lenders don’t have the added expense of physical offices scattered throughout the country, they can offer lower rates and fees to lenders. The interest rates are also fixed, so you don’t have to worry about fluctuating interest rates through the life of your loan. This can especially be a benefit if you are trying to consolidate loans, like your student loans, in order to pay less interest. Two online loan providers that specialize in consolidating and refinancing student loans are Credible and SoFi. (Here is our full Credible review and our full SoFi review.) Most online loans also report to the credit bureaus, so a loan can also help improve your credit score. Unlike credit repair companies, online loans are a natural and legit way to raise your credit score, although it will take time and you must pay your bill on time every month.

Easier access: Banks are notoriously picky when it comes to who they lend money to. Online loan services are not as picky, meaning that it can often be easier to get approved for a loan online, if you have the right credit score. Peer-to-peer lending sites like Prosper and Lending Club actually pitch out loans to individual investors, so if they are willing to take on your debt, you can get approved even with a lower credit score.

Partial loans: Unlike banks who require you to be approved for the entire loan, many peer-to-peer online lending services will allow you to take your loan even if only 60-70 percent of it is funded by individual investors. (Individual investors can bid on a part of your loan or the full amount, meaning that portions of your loan can be funded by a number of individuals.) It’s nice to know that even if you can’t get approved for the entire loan, you still have the possibility of getting approved for a portion of it.

Best for those with Good to Excellent Credit: Prosper

Although not the most popular lending company, Prosper is making waves in the online lending community. It just raised $70 million from investors in May. Prosper is a little more picky about who they lend to, since you need either good or excellent credit to be approved for a loan. Loan amounts range between $5,000 and $35,000 and can be paid back between 36 and 60 months, depending on what you are approved for. Another really strong choice for personal loans is Upstart, which isn’t crowdfunded, so it works in a more traditional way. If you want to know more, here is our full Upstart review.

Best for those with Average Credit: Lending Club

Lending Club is the most popular of the online lending services and has been so successful, it just filed the paperwork to go public. Lending Club allows loans as low as $1,000 and as much as $35,000. Lenders with credit from average to excellent can be approved, although loans are not guaranteed. Loan terms range from 36 months to 60 months. This is a good comparison of Prosper and Lending Club.

Best for Small Businesses: Kabbage

Need a small business loan? Kabbage is the best bet for you. They only deal with lending for small businesses. They also have a great and interesting way of dealing with small business loans. You are approved for lines of credit up to $100,000 based on a variety of factors, which includes linking your financial accounts, like your business checking account, Square, eBay, Amazon or other online accounts, to your application. Then, you can borrow against your credit limit and repay those smaller loans within 6 months, with as little as 1 percent interest. Here is a good breakdown on how Kabbage works and how to get approved.

CashNetUSA: CashNetUSA is one of the top payday loan sites that offers loans with no credit check. The downside of this is a higher interest rate. You can borrow between $100 and $1000, with APRs between 207% to 805%, depending on how much of a loan you need. Smaller loans with shorter terms will have higher interest rates. Generally, you will receive your loan within the next business day. CashNetUSA currently operates in 30 of the 50 states. has a wider range of interest rates depending on an array of factors, so it is easier to have a lower interest rate. You can borrow between $100-$1000, just like CashNetUSA, but’s APRs range from 14% to 1564%, depending on length of loan, size of loan, etc. You will get your loan the next business day, and operates in 37 states, more than CashNetUSA.

Avant: Avant offers a wider range of options for those looking for a loan for bad credit, but it also has a higher bar to hit with your credit check. If your credit score is below 580, you can’t borrow from Avant, but that still leaves a lot of room even if your credit score is bad or average. Avant offers loans up to $35,000, with APRs starting at 9.95%. Avant is also a peer-to-peer lender, so you will be borrowing from a grouping of investors instead of a traditional bank. Avant is available in 44 states, and can usually fund your account with your loan immediately. If you are looking for a site that offers a combination of short-term and long-term loans, check out It offers loans ranging from $1,000 to $20,000. While does offer loans to those with bad credit, they do base part of your interest rate and loan amount on your credit score, so if you have really bad credit, you should be prepared to pay more in interest rates. The benefit is that operates in all 50 states.

LendUp: LendUp is a new kind of short-term loan provider. It is beneficial to return customers, as the available loan amount goes up and the interest rate goes down the more time you use the service, all with no credit check. LendUp allows you to borrow between $100 and $35,000 and its APR ranges from 36% to 406%, which is way less than most other short-term loan companies. You can also get same day deposit of your loan, although LendUp only operates in 22 of the 55 state currently, although they are always expanding.

NetCredit: NetCredit does check your credit score, but in most cases, no credit is not an issue for being approved for a loan. With NetCredit, you can borrow between $1,000 and $10,000 and the APRs vary from 34% to 155%, depending on your credit history and other financial information. Loans are generally deposited within one business day, and NetCredit is available in 44 states.

Long-term loans online: Long-term loans have generally been fulfilled by physical banks or credit unions, but more and more long-term loan services have been popping up online. The benefit of these services is that, generally, the fees are lower because there isn’t a lot of overhead associated with running the business. Long-term loans online can also have a quicker turnaround time than traditional loans, and some offer peer-to-peer lending, where you are borrowing from individual investors instead of a large bank or corporation.

Short-term loans online: The benefits of short-term loans online are pretty straight forward. Generally, these loans have a very quick turnaround time, so you can get your money quickly and easily. Short-term loans online also usually have flexible repayment schedules, and don’t have extra fees like an application fee or early payment fee. The most obvious benefit is that you don’t need a good credit score, or a credit history at all, to be approved for these loans.

About the Author

Jeff Hindenach

Jeff Hindenach is the co-founder of Simple. Thrifty. Living. He graduated from Bowling Green State University with a Bachelor's Degree in Journalism. He has a long history of financial journalism, with a background writing for newspapers such as the San Jose Mercury News and San Francisco Examiner, as well as writing on personal finance for The Huffington Post, New York Times, Business Insider, CNBC, Newsday and The Street. He believes in giving readers the tools they need to get out of debt.

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