To the borrower, the process of seeking, requesting, and obtaining a loan online should not vary too much from site to site on the Internet. However, behind the scenes, there are significant differences about how separate finance websites operate. Nevertheless, they all begin with the same first step: the online application. The application usually inquires about the size of the loan, what its intended use will be, who will be using it, what kind of rate (adjustable or fixed) is being requested, and a little about the borrower's income.

The company then utilizes special filters to direct the form to the appropriate lender. That is, signed-up lenders specify the type of business they are willing to consider in advance. These specifications, in turn, are then used to develop the filters that automatically direct borrowers' applications to eligible lenders.

Most online finance sites will then display between two and four loan offers for the borrower to select from. Once a choice has been made, the borrower receives a tangible, paper loan package in the mail that requests more specific information about the transaction. Upon completion, this is sent back to the lender and, if all goes well, a formal closing will take place at the home of the borrower.

At the other end of the Internet connection, online finance websites generally adhere to one of two different models when it comes to the actual operation of their businesses. They can operate as either mortgage brokers or referral services. Mortgage brokers, like their traditional brick and mortar counterparts, solicit your financial information and place your loan with a third-party lender, receiving a loan origination fee and an application fee at closing (Ozer 1). That is, throughout the entire loan application process the website acts as an intermediary between the borrower and the lender. Never do the two negotiate with each other. One advantage of this model is that it allows the websites to govern their commercial activities with absolute control. Specifically, they are responsible for designing the rules followed by borrowers. Hence, these rules can be clearly posted on the website for all borrowers to refer to. Furthermore, mortgage brokers can appoint loan officers to every loan and even keep tabs on the financial status of any loan at any time.

Referral services, on the other hand, simply connect the borrower with the lender and stand back. These sites collect data from borrowers in order to match them with appropriate lenders. They pass data along and then step aside, allowing direct contact between borrower and lender (Ozer 1). At the closing of the loan is when they are paid their fee. Because the relationship between borrower and lender is not governed by the website, they can not post policies or procedures involving the loan agreement on their site. Only the lender may do so. Of course, this does not mean that the lender does not offer features just as convenient as those offered by mortgage brokers.

In essence, although today's cyber financiers provide the same basic benefits to their potential and current buyers, they do so through the application of different operating structures.

Created byAnthony M. Hill