Personal loans: online lenders or banks
The credit market has changed dramatically since online lending platforms entered the scene. Borrowers now have more options not only when it comes to loan products, but more importantly, in choosing a lender. For those looking to qualify for a personal loan, online lenders are becoming a more attractive option due to the promise of being approved in less time. Who wouldn’t want to give up the hassle of meeting a loan officer or standing in line at a bank to be refused?
But before canceling a personal loan application at a traditional bank, let’s take a closer look at the main differences between these two options. This way, you can better decide which route is the most suitable based on your current situation and your financial needs.
How is an online lender different from a bank?
Many people assume that with an online lender, you are only approved for smaller loan amounts. While this may be true at times, there are lenders today who can grant a higher amount to eligible borrowers. In this Lightstream Reviews article, you will learn that borrowers with good credit can be approved for up to $ 100,000. With this amount, you will be able to finance major personal expenses such as paying off debt, financing a wedding, renovating your home or even financing an investment or a business opportunity.
What sets online lenders apart from traditional banks is the application process. Since the transaction is done online, you eliminate the hassle of preparing and filling out documents. In some cases, it only takes one online form and a review of your credit score to get a loan. But besides convenience, there are also other notable differences in applying for personal loan online than at a bank.
Online lenders are more willing to offer unsecured personal loans
Since the 2008 financial crisis, banks have cut back on consumer lending. Even now, banks will likely advise you to get a credit card instead of applying for an unsecured personal loan. Online lenders, on the other hand, are stepping up when it comes to offering consumer products. Not only that, but the online lenders have also made the process a lot easier for the applicants.
Online lenders are more creative in their approach
The online lending approach has become more creative in recent years. Nowadays, there are peer-to-peer loans available, where individuals finance your loan and gain interest in the process. The structure remains the same where the borrower still has to qualify and submit requirements. But, this model, along with a fresher perspective on how loans are approved, gives the market a boost.
Online personal loans often have lower fees
Online lenders can afford to charge lower fees because operational costs are lower as well. Depending on the type of loan, you may also qualify for lower interest rates. However, for an unsecured personal loan, the rates may be slightly higher as this also exposes the lender to more risk. Nonetheless, an advantage here is that online lenders often have fixed interest rates, which helps you manage your payments as the interest does not fluctuate with the current financial situation.