What to Consider Before Applying for Online Loans: 3 Tips

While Italian families are still struggling with the consequences of the interest rate hikes and inflation of the last two years, However, they have not stopped resorting to credit to cover expenses and improve their housing conditions. Over half of the residents in Italy (52,7%) has in fact an active credit contract, given a growth of 2,6% compared to 2023 (Crif - Retail Credit Observatory, June 2024).

In particular, Personal loan applications increased by 5% in the first half of 2024 compared to the same period of the previous year, with interest rates around 9-10% (Bank of Italy - Statistical Bulletin, June 2024), variable based on the purpose of the loan and the applicant's profile.

I interest rates are generally lower for the online loans, thanks to lower operating costs and competition between digital platforms: in the third quarter of this year, the best APR of the practices provided on the portal of PrestitiOnline.it marked 7,29%.

The growing digitalization and innovation of the banking sector promise to make access to this form of credit increasingly easier, especially for young applicants.

But what aspects should be taken into consideration before deciding to resort to a personal loan? We will see it here with some practical advice.

1. Evaluate your financial situation

Before applying for a personal loan, it is essential make an assessment of your financial situation, since the bank checks the debtor's creditworthiness and ability to repay the amount before granting a loan.

A customer who has had insolvency problems in the past or who has been reported to the Central Risk Office, the Bank of Italy's information system that collects debt positions, may have difficulty obtaining financing. In any case, Those who have a permanent contract or are retired can access the salary transfer more easily of salary or pension, a type of loan that often offers lower interest rates than traditional personal loans.

1. Specify the purpose to get better conditions

Even if the personal loan is a form of non-finalized financing, which does not entail the obligation to provide any justification for the use of the money, It is always advisable to declare the purpose of the loan to the credit institution because banks and financial companies can apply different interest rates depending on the purposeFor example, a loan intended to raise cash without specifying its use may involve higher costs than a loan intended for a specific purpose, such as renovating a property or purchasing a car.

1. Pay attention to the actual cost of the loan

It is not easy to define the real cost of a loan if we consider that the first declared rate is the TAN (nominal annual rate), when instead measuring the real cost is the APR, Annual Percentage Rate, which represents the actual cost that will have to be sustained, including additional costs such as investigation, intermediation and management of the installments, in addition to charges and taxesCalculating the monthly payment should be based on the overall cost, and online calculators can be a significant aid in assessing loan payments and better planning the entire term of the loan.

Applying for a personal loan can therefore be an effective solution for covering significant expenses, but it's essential to proceed with awareness and make an informed and sustainable decision over time, comparing offers on the market. Transparency regarding costs, attention to the APR, and clarity regarding the financing purposes can make the difference between a profitable opportunity and a commitment that's too costly to bear.