Online services that allow you to borrow money for a short period of time have been around for several years, however, their popularity is limited by the fact that most individuals do not trust them. Some are afraid that these companies might try to slip extra taxes and charges into their agreements, or that they will steal personal and financial data. Others do not know enough about how they work in order to understand that they can be trusted.
We’ll take a look at the basics of how borrowing money online works, and also at how you can make sure that you find a service that will always put the interests of its clients before its own:
Understanding exactly how online money-lending services work
Online loans work somewhat similar to banks, with the exception that all the money comes from private creditors and all transactions are handled by the platform itself. In other words, when you borrow money, your request must be approved by the online service, not the creditors. The online company does not follow the same structure as a bank and will often have fewer restrictions in terms of who can get a loan.
Generally speaking, most online lending companies will not even perform a credit score check in order to determine if you are eligible or not for a loan. This, however, only happens if you want to borrow a small amount of money for a short period of time.
This having been said, requesting a loan is done by filling in an online form and uploading copies of personal documents such as:
• Driver’s license;
• Work contract;
• Last utility bill;
It is important to note that all of these UK companies are heavily regulated by the government. As a result, all the private information that you upload as part of the application process cannot be disclosed to third parties without your consent.
Furthermore, the money that you borrow will not show up on your bank statement as a loan, but as a regular transfer and will not have any impact on your credit score. Depending on the amount of money, you may also not be required to have a guarantor. Once your loan request is approved, you receive the money in a matter of minutes. After this, you will have to pay it back in monthly installments, according to your agreement.
One part of the whole service that is not regulated by the government is the limit of the monthly interest rate, which can vary greatly from one platform to another.
What to look for when choosing which service to use?
Finding a reliable online money lending service that you can use means more than choosing one that has a low-interest rate and as few additional fees as possible. If you intend to borrow money for an extended period of time, you will have to look for a platform that:
• Has a good trust rating – Look at websites like TrustPilot that contain reviews from individuals who have used the platform in the past. If the score is OK and most testimonials show that previous users have had a good experience, you will as well;
• Has no hidden fees – Read all the documentation presented on the platform’s website and make sure that you understand what each fee is for and if it applies to your loan or not. This will ensure that you won’t be surprised by having to pay more than what you expect;
• Can transfer money to your accounts – Most services will be able to transfer money to all the major banks in the UK, however, only a limited number can send it to other platforms such as PayPal;
• Fits your needs – Some companies require that you have a guarantor in order to borrow money for an extended period of time, however, there are also some that will only do so if you need more than a couple of hundred pounds;
Most money-lending platforms do not perform credit checks, however, there are some who do. If you have a poor credit score or do not the loan to be marked on your permanent financial records, make sure that the service that you borrow money from does not report the transaction to any of the main credit registers in the UK.
Money lending apps and services are faster and less restrictive than banks, however, you do need to know what to look for before agreeing to borrow money from one. Look at the tips in our guide and always make sure that you understand all the fees that you must pay.
As a rule of thumb, once you find a reliable service that you like using, stick to it. There is no use looking for another one if you’ve had a good experience in the past.