What could be a potential drawback of taking an online loan?

One potential drawback of taking an online loan is that they can have higher interest rates compared to traditional bank loans. This is particularly relevant in the context of micro enterprises, which often rely on quick and accessible funding options to maintain cash flow and support their operations. Online lenders frequently operate with different risk assessment models than banks. To mitigate the perceived risk of lending to small businesses or startups—which typically have less credit history—these lenders may charge higher interest rates to ensure that their investment is adequately protected.

Additionally, due to the convenience and quicker access that online loans provide, borrowers may overlook the cost implications of higher interest rates. This can lead to a longer-term financial burden, particularly if the business does not generate enough revenue to cover the increased repayment costs.

In contrast, limitations on certain industries, costs being generally less than bank loans, and longer approval times do not typically apply to the scenario of online loans as significantly as interest rates do. Hence, the higher interest rates stand out as a primary concern for potential borrowers considering online loan options.