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Paperless Loan: What Is It?

Paperless Loans - What Are They?
Lauren Ward

Lauren Ward

Updated May 11, 2022
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Editor’s note: Lantern by SoFi seeks to provide content that is objective, independent and accurate. Writers are separate from our business operation and do not receive direct compensation from advertisers or partners. Read more about our Editorial Guidelines and How We Make Money.
Paperless, or online, loans are a convenient and fast option for borrowing money. Unlike traditional personal loans, you don’t need to fill out multiple forms, submit any paper documents, or even visit a lender’s office to apply for or receive the loan. The entire process — from pre-qualification to signing — is done digitally via your computer or mobile device.While a paperless loan can be easier and faster to get than an in-person loan, interest rates and fees may be higher compared to a loan from a bank or credit union. Here’s what you need to know about paperless loans, including: 
  • How paperless loans work
  • Reasons to consider a paperless personal loan
  • How to apply for an online personal loan     

What Is a Paperless Loan?

Many financial technology companies and private lenders offer online personal loans. These are sometimes referred to as “paperless” loans because you can apply and receive funds without submitting, signing, or receiving any paper documents. Online personal loans are typically unsecured loans (meaning no collateral is required), come with fixed interest rates (ranging between 6% and 36%, depending on your credit profile), and offer several repayment term options. Loan amounts generally range from $1,000 to $100,000. Some online lenders have loan minimums between $1,000 and $2,000, so an online loan may not be an option if you’re looking for a smaller personal loan.As with other personal loans, the money can be used for almost any purpose, including making a large purchase, covering medical bills, handling unexpected expenses like a home or car repair, paying for a wedding, or consolidating higher interest debts. Some online lenders offer conveniences like mobile management via an app and sending money directly to creditors if you’re consolidating debt.Recommended: Personal Loan vs. Credit Card 

Can I Get a Paperless Personal Loan?

Each online lender uses its own underwriting formula. Typically, they will consider credit history and credit scores when reviewing your loan application. Good credit can make it easier to get a loan, as well as a favorable interest rate. Some online lenders, however, are willing to work with borrowers who have fair or poor credit. In addition, most will give prospective borrowers the ability to see if they’re prequalified, which can be helpful if you’re interested in checking your rate options before filling out an application. 

Reasons to Consider Paperless Personal Loans

There are several advantages to online personal loans. These include:

Quick Disbursal

Paperless loans don’t require a long time to process, so they can be a good option for handling life’s surprises (such as a broken-down car or a medical emergency). In some cases, a lender may actually be able to deposit funds into your account as soon as the same day you apply. 

Minimal Documentation

With online loans, you don't need to collect (or print out) reams of financial data and bring them into a local branch or fill out multiple paper forms. Lenders simply connect to your financial accounts online. 

Security

As long as you are working with a reputable lender, applying for a personal loan online is considered a very safe process. The information and documents you share online are kept protected and confidential. With paper files, there is always the risk that documents containing personal data could get lost or misplaced.

Eco-Friendly

Paperless loans are filled out and approved entirely online, so no paper is used or wasted. If you’ve ever taken out a loan, you know that the entire process can be repetitive and paper-heavy.Recommended: What Are the Pros and Cons of Personal Loans? 

Paperless Loan Processing

While online loans are technically “paperless,” keep in mind that you may still need to locate and upload some physical documents, such as recent pay stubs or tax forms, during the application process, However, you won’t have to submit any hard copies of your financial or personal information or be required to visit a branch in person.Because approval and disbursement of an online loan are largely computerized, processing of the loan is typically faster than it would be for a traditional personal loan. In fact, sometimes both approval and funding can happen within a few hours. 

Applying for a Paperless Loan

You can apply directly on a lender’s website or use an online marketplace to check rates with multiple lenders and compare personal loan offers. Either way, here’s how the process works:

1. Apply for Prequalification

The prequalification process can quickly give you a loan offer that you might qualify for. When you get prequalified, the lender will typically pull a soft vs. a hard credit inquiry, which won’t affect your credit scores. While getting prequalified doesn’t mean you’re approved for a loan, it helps you to understand whether you’re likely to be approved and the loan terms you may qualify for.  To prequalify, you typically need to provide some basic information, such as:
  • How much you want to borrow
  • How you’ll use the money
  • Your annual income
  • Your employment status
  • The last four digits of your Social Security number

2. Pick a Lender and Loan Option 

Once you submit your information, you’ll likely receive information about the loan amount you may qualify for, estimated monthly payment, estimated interest and fees, and loan term. You can then compare offers and pick the online loan with the rate, monthly payment, loan amount, and term that best fits your budget and financial needs. Here are some things to consider when comparing offers:
  • APR The loan’s estimated annual percentage rate, or APR, is how much it will cost you to borrow money, including the interest rate and any potential fees. 
  • Loan term Generally, loans with longer terms have lower monthly payments. However, they could cost more in interest in the long run.
  • Origination fee Some lenders charge this fee, which is typically a percentage of the loan amount. An origination fee can increase the cost of the loan and decrease the amount of the loan.
Keep in mind that prequalification doesn’t guarantee that you’ll be approved for a loan. You’ll still need to submit additional information to the lender in order to complete your application. 

3. Submit Your Application 

Once you choose an offer, you can complete your loan application. The lender will tell you exactly what you need to submit, which might include:
  • Monthly housing cost
  • ID verification
  • Social Security number
  • Income verification
Finalizing your loan approval will typically result in a hard credit inquiry, which may temporarily affect your credit scores. Once approved, you may receive your loan within a day or two, depending on the lender.

The Takeaway

By eliminating the process of paper filing, online (or paperless) loans can make borrowing money simple and fast. Paperless personal loans are primarily offered by alternative lenders. While some banks offer an online application option, you typically need to visit a branch and supply paperwork at some point in the loan process. The cost of an online personal loan may be higher than a traditional personal loan, so it can be a good idea to shop around and compare personal loan rates before choosing. With Lantern by SoFi’s online lending platform, you can quickly receive and review offers from multiple personal loan lenders without making any type of commitment.
Photo credit: iStock/PixelsEffect
The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.SOLC0222001

Frequently Asked Questions

What are paperless loans?
Why should I get a paperless loan?
Can I get a paperless personal loan?

About the Author

Lauren Ward

Lauren Ward

Lauren Ward is a personal finance expert with nearly a decade of experience writing online content. Her work has appeared on websites such as MSN, Time, and Bankrate. Lauren writes on a variety of personal finance topics for SoFi, including credit and banking.
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