You’ve probably heard that online lenders are the future of borrowing and lending. Of course, you probably already know that online lenders are typically faster and more convenient than traditional lenders. But do they really have anything to offer that banks can’t?
We’ll look into how they compare and help you decide whether it’s worth applying with one of these new-fangled lenders or sticking with your local bank branch.
Speed
Speed is a major distinguishing factor. While traditional banks may take up to two days to accept your loan, online lenders can often do it in as fast as 24 hours. This may be a good option if you need money quickly or don’t want to wait a few days.
For example, CreditNinja is an excellent choice if you’re looking for a trustworthy online lender. They provide lending products in nearly every state in the country. You can apply for a CA, AL, or GA personal loan and get your money as soon as the same day.
However, not all online lending companies work the same way. Some can approve your loan application and deposit the funds in your account within 24 hours, while others may have you wait a whole day. Before deciding on a lender for your personal or company’s needs, it’s crucial to research their policies on processing times.
Convenience
Faster service is a common perk of dealing with online lenders. The application process for a bank loan typically involves a customer visiting or calling the bank’s physical facility. It may be inconvenient for consumers who live far from their local branch or work during regular business hours and thus cannot quickly go to the branch.
Potential borrowers can apply for loans from online lenders whenever they’re ready, right from the convenience of their home computers. Also, they provide round-the-clock service, so those who work irregular hours or overnight don’t have to take time off work specifically to stop by the bank.
Paperwork
It’s hassle-free in terms of paperwork requirements. With online lenders, there aren’t any lengthy applications, piles of paperwork, or trips to the bank required. In addition to saving money on gas, doing everything online eliminates the need to use your time and energy to go to different locations.
Collateral
Another essential fact to remember is that when you apply for a loan online, you won’t have to put up any collateral. To put it in another way, you won’t have to give up anything in your possession or as collateral to get approved.
Owing to technological advancements, online lenders can now assess your reputation before loaning you money, allowing them to offer unsecured loans.
Fees
Fees may also vary between traditional banks and online lenders. There are online loan providers who don’t charge any fees, and there are also those who do. If there is a fee for the application, it could be anything from $50 to $200 and may be taken out of the loan amount when released.
In addition to interest, specific online lenders may add additional costs such as late payment or origination fees. Some online lenders even have “prepayment penalties,” which require you to pay more than the original loan amount if you pay it off early.
Interest and Repayment Terms
Online lenders charge more fees and interest and offer less favorable payback terms than brick-and-mortar banks and credit unions. This is because internet lenders use more expensive technology than traditional lenders to verify your identification and creditworthiness.
If you borrow $5,000 from a bank, for instance, you might pay $100 in application costs and an annual percentage rate (APR) of between 5% and 18%. The application cost alone from an online lender might be $200, doubling the amount from a bank. Some online lenders offer interest rates of up to 40%, which is much higher than the typical APR of 15% to 18%.
Repayment terms offered by online lenders are typically longer than they would be with a traditional lender, often reaching five years or more.
Loan Amounts Available
With traditional lenders, you can only get the money you need and no more. If you want to borrow a bigger sum of money and pay it back over an extended time, that might not be possible with a traditional lender. On the other hand, online lenders are more flexible in their rules on granting loan amounts and payment terms. Some may even tailor payment schemes for each client based on their needs.
Although the loan amounts offered by online lenders are typically lower than those offered by traditional lenders, it’s still essential to keep in mind that your actual borrowing limit will be based on various criteria. These factors include your credit history and capacity to make loan payments in full and on time.
Conclusion
Significant development has been made in the lending industry. These days, it’s easier to get a better deal from an online lender than from a brick-and-mortar bank. They have all the benefits of taking out a loan from your local bank or credit union but with more flexibility and convenience.
