How to Use Online Loan Sites

As banks tighten lending standards to reduce risk and make loans more expensive, consumers are flocking to online lending channels.

Whether borrowers seek to acquire a car loan, student loan, small-business loan, mortgage or new credit card, there are lots of resources online to compare interest rates. Consumers can also access capital from private lenders by showcasing themselves as prime loan candidates on sites such as E-Loan.com, RaiseCapital.com, Prosper.com, Fynanz.com, LendingClub.com, SimpleTuition.com and Zopa.com.

Consumers have caught on.

RaiseCapital.com has seen page views climb nearly 600% since the start of the year and has more than tripled its count of unique visitors. SimpleTuition CEO Kevin Walker says that while traffic to the site had been growing fast even before the credit crunch, is now quintupling instead of doubling.

Walker suggests that consumers "more than ever shop around, because lenders are more than ever adjusting their prices" as interest rates and market conditions fluctuate. But he adds, borrowers will have to act fast to take advantage of low rates when they occur, because "they may not last long."

Here are some tips for those who are seeking a loan online:

1. Beware of sites set up to take advantage of struggling borrowers. Banks are not the only ones charging high interest rates -- many of the peer-to-peer lenders also bid up rates to levels that low-income folks with bad credit are likely not able to afford.

"Payday-lending" sites such as CashNetUSA.com offer small, short-term debt at astronomical rates -- for instance, 521% APR with a $20 fee on a $100, two-week loan. The site argues that the loan could cost more if it's being used to pay off balances that will otherwise incur late fees, though there is almost certainly a less expensive alternative.