Top 10 tips for shopping for online loans

This isn't your father's banker. Your father's banker was probably human. Today, you can get online loans without ever stepping into a bank -- actually, without even leaving your home. But that facelessness can be either convenient or dangerous. You need to be cautious when shopping for online loans, so you find a legitimate online loan provider and not a scam artist trying to take rather than give you money.

Here are the top 10 tips for getting online loans.

Online Loans Tip #1: Make the most of online advantages. One of the biggest benefits of shopping for online loans is you can easily compare rates and offerings and get qualified and approved quicker than from traditional banks.

Online Loans Tip #2: Decide what you want from your online loans. Whether you want a low APR, a low monthly payment or someone to give you an online loan despite your lower than average credit score, determine your priorities and shop accordingly.

Online Loans Tip #3: Be savvy about getting "poor credit" loans online. Online loans can be a great option if you have less-than-stellar credit, because online lenders tend to take on higher risk loans. However, they do charge more for them, and this market is ripe with red flags: hidden fees, excessively high rates and super high points. So if you have credit issues, this could be your opportunity to get decent rates if you are extra careful about working with a legitimate online lender.

Online Loans Tip #4: Look into online peer to peer loan sites. Online loan sites like Kiva, MicroPlace,, Zopa,Lending Club and GlobeFunder are examples of sites fueling the peer to peer online loan trend. The online loans they provide are usually microloans, so the loan amounts might be smaller, but terms and rates of these online loans tend to be better than those offered by other banks and credit cards.

Online Loans Tip #5: Do NOT use online payday loan sites.These online loans, which are due on your next payday, can charge fees of up to $30 for each $100 borrowed and APRs of a crazy 650%. Also, you usually have to provide your checking account information to these online sites, which puts you at even more risk. These payday online loans may automatically renew loans and withdraw fees from your checking account every payday, and if you don't have enough to cover the fees, you're hit with insufficient funds fees from both the payday online lender and your bank. No matter how cash-strapped you are, don't touch these online loans.

Online Loans Tip #6: Do research on sites that aren't strictly online loan sites. For example, research online loan rates and make use of articles and calculators at non-loan sites like HSH, Mortgage Bankers Association of American, the U.S. Department of Housing and Urban Development, Fannie Mae. and Freddie Mac.

Online Loans Tip #7: Make a stop at the Web sites of brick-and-mortar banks. Bank of America, for example, is a direct lender site where you can get information about its loan products online, but to get complete information on its loans, you'll need to call or go to the bank in person.

Online Loans Tip #8: Put your online loan on the block at auction sites. At online loan auction sites, such as,, you submit a loan application online and lenders compete for your business. Some of those competing are subprime lenders, so you can still apply if you don't have perfect credit. It usually takes a day or so to see who has bid on your online loan.

Online Loans Tip #9
: Check out multilender shopping sites. At online loan sites like and, you enter information such as loan amount and property details to find out current rates, APR and points from several lenders. If you see an online loan you like, you can choose to fill out an application -- these sites will then process the documentation and forward the online loan paperwork to the lender. However, be careful when you go this route -- some dissatisfied customers say lenders have treated them like second class online loan citizens.

Online Loans Tip #10: Make security a priority. Do not transmit your Social Security number, bank numbers, or other personal financial information to any online companies you do not know. And be twice as diligent with online loans as you would with a face-to-face loan -- be careful of online loan sites that use bait-and-switch games and teaser rates, and read all the fine print.
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