Looking for a Personal Loan? Avoid Online Lenders With These 4 Red Flags

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Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print to help you understand what you are buying. Be sure to consult with a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time.

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It’s one thing to know that you need a loan, it’s another to know where to find it.

So, you’d be forgiven for starting your search on Google.

That approach could lead you to consider online loans with monthly payments. Although lenders without brick-and-mortar buildings are known for offering faster service than traditional banks, they’re not without risks.

Before you take out a loan online, ensure you’ve found the right lender. You can accomplish this by understanding how these loans work and reviewing red flags that might pop up from the lenders in your search results.

How online loans with monthly payments work

Installment loans — or loans with set, monthly payments — can refer to borrowing money for big-ticket items like a college education (student loan), a new car (auto loan), or even a home (mortgage).

But more likely, you’re considering online companies with monthly payments to secure a personal loan. This typically entails a smaller loan amount and a shorter repayment term.

Whatever the reason for your borrowing, online loans with monthly payments work the same way. You apply for a specific amount, supplying personal financial information like your credit score. The lender evaluates you as a customer and offers you four details specific to your potential loan agreement:

  1. Interest rate (fixed or variable)
  2. Repayment term
  3. Monthly payment
  4. Information about fees

Your monthly payment would cover the principal amount you borrowed, plus the interest that accrues.

Say you borrow $5,000 at a 20% interest rate to cover unforeseen expenses at home. Over a three-year repayment term, you would pay $186 per month. After 36 months, you would have paid $1,689 in interest, or $6,689 total to borrow the original $5,000.

4 red flags of online loan companies with monthly payments

You can tell a lot about an online lender by its home page. You’d be right to be skeptical of a flashy, colorful website that throws around ad-speak like “no credit necessary” or “instant approval.”

Unfortunately, you’ll have to go a few layers deep to separate shady lenders from their more reputable peers.

Here are four red flags to consider when looking for loans online with monthly payments.

1. High interest rates

It’s common knowledge that personal loans come with higher interest rates than, say, student loans or home mortgages. But there’s also a big divide between the rates online lenders offer on personal loan products.

One of the first steps to take when vetting an online lender is to check its rates. You can find a link to them at the top or bottom navigation bar of the lender’s website. If rates are hard or impossible to find, that could be another red flag because transparency matters.

Be wary of a lender offering a significant range of rates, say 29% to 229%. Also, shy away from lenders that have astronomical maximum rates, such as those as high as 1,200%.

Although you won’t receive your specific rate until completing an application, find online lenders that offer competitive ranges for all customers. You’ll want to find rates that are at least in the same ballpark as those of a credit union, which offer Payday Alternative Loans at or below 28%.

2. Slow or poor customer service

Even if you’ve shopped rates and found an online lender to fit your needs, you might discover a red flag during the loan application process. Ask questions about your loan terms and see what sort of response you receive from the lender’s support team. Also, note how long it takes to receive the help you need.

Because you’ll be borrowing and repaying as much as thousands of dollars, you’re going to have questions before signing on the dotted line. If your lender candidate is either unhelpful or unresponsive, realize that you probably won’t be treated any better after you give them your business.

Focus on online lenders that are informative and fast to come to your assistance. You can use crowdsourced customer review websites like Trustpilot or independent ratings organizations like the Better Business Bureau (BBB). Research them as if you were vetting a student loan refinancing company.

3. Inflexible terms

You should know in advance what loan terms you’d accept. If you decide that making smaller payments over three years suits your finances better than a 12- or 18-month repayment plan, for example, ensure you find a lender that offers that flexibility.

Unfortunately, you’re likely to find inflexibility in the terms of some online loans with monthly payments. One might offer cash advances of $100 or more or only offer loans with a minimum balance of $4,000.

From the loan amount to the repayment term, find a lender that matches each of your preferred loan terms. Aside from being able to fund the amount you’re looking to borrow, your criteria might look something like this:

  • Interest rate: Fixed and below the local credit union’s rate
  • Repayment term length: Two to three years
  • Monthly payment: $225 or less
  • Information about fees: No fees for an early payoff

4. Hidden or avoidable fees

Like any financial transaction in the hundreds or thousands of dollars, you can expect fees with online loans with monthly payments. But some personal loan fees could be avoidable.

If you choose a conservative loan term and expect to pay off your loan early, for example, try to find a lender that doesn’t have prepayment penalties. These can tack on additional costs if you pay off your debt early.

Also, be on the lookout for penalties for late payments. Reading the fine print — and bugging customer service — should tell you exactly how much you can expect to pay if you miss a payment.

The more reputable the lender, the less likely they’ll contain hidden fees in the loan agreement. But a lesser-known lender might hide their extra costs, so prepare to do some digging once you’ve zeroed in on a lender that meets all your other requirements.

Taking out loans online with monthly payments

Understanding exactly how your monthly payments will work is a good first step before resorting to a personal loan. A great second step is finding a lender without these red flags.

Borrowing money from online loan companies with monthly payments might be easier and faster than taking on the mountain of paperwork inside of a traditional bank. Just make sure the lender is actually better for you and your finances.

Interested in a personal loan?

LendingTree allows you to compare rates from multiple lenders by filling out one easy form. Advertiser Disclosure

Student Loan Hero Advertiser Disclosure

Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print to help you understand what you are buying. Be sure to consult with a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time.

Advertiser Disclosure

Student Loan Hero Advertiser Disclosure

Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print to help you understand what you are buying. Be sure to consult with a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time.

RATES (APR)loan amount
5.99% – 18.82%1 $5,000 to $100,000
7.00% – 35.99% $5,000 to $30,000
7.99% – 35.97%* $1,000 to $35,000
99.00% – 199.00%2 $500 to $4,000
5.99% – 24.99%3 $5,000 to $35,000
7.99% – 29.99%4 $7,500 to $40,000
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NMLS #1136: Terms & Conditions Apply
1 Includes AutoPay discount. Important Disclosures for SoFi.

SoFi Disclosures

  1. Fixed rates from 5.99% APR to 18.82% APR (with AutoPay). SoFi rate ranges are current as of March 19, 2020 and are subject to change without notice. Not all rates and amounts available in all states. See Personal Loan eligibility details. Not all applicants qualify for the lowest rate. If approved for a loan, to qualify for the lowest rate, you must have a responsible financial history and meet other conditions. Your actual rate will be within the range of rates listed above and will depend on a variety of factors, including evaluation of your creditworthiness, years of professional experience, income and other factors. See APR examples and terms. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account.
  2. To check the rates and terms you qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull.
    See Consumer Licenses.
  3. Minimum Credit Score: Not all applicants who meet SoFi’s minimum credit score requirements are approved for a personal loan. In addition to meeting SoFi’s minimum eligibility criteria, applicants must also meet other credit and underwriting requirements to qualify.
  4. If you lose your job through no fault of your own, you may apply for Unemployment Protection. SoFi will suspend your monthly SoFi loan payments and provide job placement assistance during your forbearance period. Interest will continue to accrue and will be added to your principal balance at the end of each forbearance period, to the extent permitted by applicable law. Benefits are offered in three month increments, and capped at 12 months, in aggregate, over the life of the loan. To be eligible for this assistance you must provide proof that you have applied for and are eligible for unemployment compensation, and you must actively work with our Career Advisory Group to look for new employment. If the loan is co-signed the unemployment protection applies where both the borrower and cosigner lose their job and meet conditions.
  5. Terms and Conditions Apply: SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet SoFi’s underwriting requirements. Not all borrowers receive the lowest rate. To qualify for the lowest rate, you must have a responsible financial history and meet other conditions. If approved, your actual rate will be within the range of rates listed above and will depend on a variety of factors, including term of loan, a responsible financial history, years of experience, income and other factors. Rates and Terms are subject to change at anytime without notice and are subject to state restrictions. SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. Licensed by the Department of Business Oversight under the California Financing Law License No. 6054612. SoFi loans are originated by SoFi Lending Corp., NMLS # 1121636. (www.nmlsconsumeraccess.org)
2 Includes AutoPay discount. Important Disclosures for Opploans.

Opploans Disclosures

Direct Deposit required for payroll.

Opploans currently operates in these states: . *Approval may take longer if additional verification documents are requested. Not all loan requests are approved. Approval and loan terms vary based on credit determination and state law. Applications processed and approved before 7:30 p.m. ET Monday-Friday are typically funded the next business day.

  1. To qualify, a borrower must (i) be a U.S. citizen or permanent resident; (ii) reside in a state where OppLoans operates; (iii) have direct deposit; (iv) meet income requirements; (v) be 18 years of age (19 in Alabama); and, (vi) meet verification standards.
  2. NV Residents: The use of high-interest loans services should be used for short-term financial needs only and not as a long-term financial solution. Customers with credit difficulties should seek credit counseling before entering into any loan transaction.

  3. OppLoans performs no credit checks through the three major credit bureaus Experian, Equifax, or TransUnion. Applicants’ credit scores are provided by Clarity Services, Inc., a credit reporting agency.

  4. Based on customer service ratings on Google and Facebook. Testimonials reflect the individual’s opinion and may not be illustrative of all individual experiences with OppLoans. Check loan reviews.

  5.  

    Rates and terms vary by state.

3 Includes AutoPay discount. Important Disclosures for Payoff.

Payoff Disclosures

  1. All loans are subject to credit review and approval. Your actual rate depends upon credit score, loan amount, loan term, credit usage and history. Currently loans are not offered in: MA, MS, NE, NV, OH, and WV.
4 Important Disclosures for FreedomPlus.

FreedomPlus Disclosures

  1. The loan terms presented are not guaranteed and APRs presented are estimates only. To obtain a loan you must submit additional information and documentation and all loans are subject to credit review and our approval process. The range of APRs is 7.99% to 29.99% and your actual APR will depend upon factors including your credit score, usage and history, the requested loan amount, the stated loan purpose, and the term of the requested loan. To qualify for a 7.99% APR loan, a borrower will need excellent credit on a loan for an amount less than $12,000.00, and with a term equal to 24 months. Adding a co-borrower with sufficient income; using at least eighty-five percent (85%) of the loan proceeds to directly pay off qualifying existing debt; or showing proof of sufficient retirement savings, could help you also qualify for the lowest rate available. All loans are made by Cross River Bank and MetaBank®, N.A., Members FDIC.
* Important Disclosures for Upgrade Bank.

Upgrade Bank Disclosures

Personal loans made through Upgrade feature APRs of 7.99%-35.97%. All personal loans have a 2.9% to 8% origination fee, which is deducted from the loan proceeds. Lowest rates require Autopay and paying off a portion of existing debt directly. For example, if you receive a $10,000 loan with a 36-month term and a 17.98% APR (which includes a 14.32% yearly interest rate and a 5% one-time origination fee), you would receive $9,500 in your account and would have a required monthly payment of $343.33. Over the life of the loan, your payments would total $12,359.97. The APR on your loan may be higher or lower and your loan offers may not have multiple term lengths available. Actual rate depends on credit score, credit usage history, loan term, and other factors. Late payments or subsequent charges and fees may increase the cost of your fixed rate loan. There is no fee or penalty for repaying a loan early. Personal loans issued by Upgrade’s lending partners. Information on Upgrade’s lending partners can be found at https://www.upgrade.com/lending-partners/.