How Do Online Bank Loans Work?

The rise of online business transactions has resulted in more consumers choosing to apply for and close bank loans online. When applying for a bank loan you must fill out an extensive amount of paperwork, most of which can be completed online. Learn the ins and outs of applying for and finalizing online bank loans.

Applying

The first step of applying for an online bank loan is to choose a lending website. You can either choose a specific bank or a lending website that allows you to apply to more than one bank at a time. The application requests personal and financial details like name and address, employment situation and income. You must answer each question and then submit the information. The application goes directly to the lender's office for evaluation.

Preparation

You need a few key pieces of information handy to apply for a bank loan online. Besides the basics (Internet connection and compatible browser for the application website) you must also have your driver's license, Social Security number and recent income information handy. You should also have an idea of the terms you want for the loan, including the term in months, amount you wish to borrow and estimated payment you can make.

The Decision

After applying for an online bank loan the lender sends the decision either via email or in some cases right in your browser instantly. If the application meets the lender's requirements you receive an approval message with additional instructions to finalize the loan. For instance, you may have to provide documents proving statements on the initial application. Once all requirements are met, the lender commonly issues the money through an online transfer to your bank account or by check at your request.

Suggestions

Before applying for an online bank loan check your credit scores, from all three major reporting agencies (Transunion, Equifax and Experian) online. For your best chances of loan approval at the best available rates you should have a score of at least 700 (healthy credit). Lower scores may still garner an approval but may come with higher rates. Work on building up your credit history before applying for the online bank loan. You can dispute errors, get caught up on late payments and reduce existing credit balances to help boost your score and increase chances of approval.