Personal Loans

How Do Personal Loan Smartphone Apps Work?

Personal loan smartphone apps can help you apply for and make payments on a personal loan. Learn how they work.
A man uses a smartphone app to make a loan payment
By Gina Freeman
Updated on: February 4th, 2022

Personal loan smartphone apps are popular because of their speed and convenience. Instead of trekking to a brick-and-mortar institution, making nice with a banker, and inking pages of forms, we can now get fast loans online by tapping a few keys on our phones, tablets, or laptops.

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What Are Apps for Personal Loans?

Apps for personal loans are just different ways of applying for and managing personal loans. They are designed to simplify the loan application and delivery process.

There are two main categories of online loans — traditional personal loans and short-term fast loans. Most personal loan providers, like LightStream and Marcus, offer apps to streamline the application process, make payments and manage your account. Others, like Dave, Earnin, and Branch, supply small, short-term fast loans at much lower rates than payday lenders.

Apps for iPhone and Android devices appeal to people who are comfortable with online interactions and don’t require an in-person experience. Millennials, for instance, are known to like the speed and anonymity of borrowing online.

How Are Apps for Personal Loans Different?

Online lenders are often financial technology (fintech) companies. Some work with banks to fund loans, and others partner with peer-to-peer platforms. The newest entries are traditional banks and brokerages that have created their own mobile-friendly apps to appeal to tech-savvy applicants.

The apps differ from traditional banks in that many offer just a few products — not a full range of banking services. They automate much of the application and underwriting process, often seamlessly pulling in data electronically from credit bureaus, employers, and banks. These lenders often serve a client base largely ignored by big, traditional banks. Smaller borrowers who may have limited or blemished credit experience.

How to Get Started With Online Loans

Your first step is to download the lender’s mobile app and complete a prequalification questionnaire or loan application online. If you’re unsure if you qualify for a loan, look for an app that lets you prequalify without impacting your credit score. You need to register with the app and link your checking account so the lender can deposit your loan proceeds electronically.

Some personal loan apps allow you to complete and submit an application from a mobile device. Others have you answer a few questions to prequalify for financing and then show you products and interest rates before you make a formal application. Note that you may not always be able to apply with the app, and may be directed to the lender’s website.

How Do Personal Loan Smartphone Apps Work?

Next, you’ll supply copies of your ID, proof address, and pay stubs or tax returns to show your income. Some lenders also want copies of your bank statements. You may be able to do this by snapping and uploading pictures with your smartphone, or you may have to finalize your application via the company’s website on a computer.

Once the lender approves your application and verifies your income and employment, it funds the loan electronically, depositing the proceeds into your checking account.

In addition to mobile loan applications, personal loan apps may offer one or more other features:

  • Online payments
  • Checking your loan balance
  • Withdrawing cash from personal lines of credit
  • Personal loan calculators (payments and affordability)
  • Budgeting
  • Banking
  • Investment advice and accounts

Whether your lender is a bank that furnishes mobile services or a fintech company that also offers banking and investments, your app may come with a slew of bells and whistles that you may find helpful.

How Do Fast Loan Apps Work?

The short-term payday loan apps work differently. You download the app and register. The app may charge a monthly membership fee. Then you link to your employer and bank account. When you need to cover an overdraft or get an advance against your paycheck, these apps advance small sums that you repay on your next payday.

Are Personal Loan Apps Safe?

You may be concerned about the safety of personal loan apps. In India, Google recently purged hundreds of personal loan apps from its Play Store after it discovered some were created by scammers, not lenders.

While you should always be careful with your personal information online, you can safely borrow money online if you exercise some care:

  • Work with well-known online lenders or lenders associated with banks. They have to protect their reputations to compete and survive.
  • Check the Better Business Bureau website or sites like Trust Pilot for other borrowers’ reviews and government complaints.
  • Check the lender’s state license. They should disclose it on their website.
  • Read the app reviews on the App or Play stores.

There are also red flags that tell you when to avoid a personal loan provider. If a lender wants an upfront fee or does not disclose its loan annual percentage rate (APR), avoid it. You should be able to find its office locations and contact information online. And avoid lenders that guarantee approval for a personal loan.

Personal loan smartphone apps are not that different from online personal loans. They primarily offer a speedier or more private application process and make it easier for you to manage your loan when you’re on the go.

About the Author

Gina Freeman writes about personal finance and has been featured on, The Mortgage Reports, MSNMoney, Fox Business, Forbes, The Motley Fool, and other fine websites. Her background includes tax accounting with Deloitte, over 20 years in mortgage sales and underwriting, systems consulting for Experian, and several years in bankruptcy law. Gina enjoys helping consumers make confident and intelligent financial decisions.