Did you know that two-thirds of all loans originated online last year?
These days, marketers want us to believe there aren’t too many hurdles when it comes to borrowing money. In fact, it seems all you need to do is fill out a simple online application and in no time, you’re approved for a loan.
Unfortunately, that couldn’t be farther from the truth. If you want to borrow money, you’re going to have to do some legwork, which means finding the right personal vendors for online loans or bank loans.
There are a number of reasons for this, including interest rates and restrictions for borrowers. By simply doing a little research, though, you can find the right type of lender for your online loan needs.
For a breakdown of online loans versus traditional bank loans, read on.
Why Online Loans Have Become Popular
In the past, people looking for a lender for a personal loan didn’t have many choices. Most people would just go to their bank and ask for a loan. Or, if you were a smart shopper, you could check out other banks or credit unions in the area.
But the Internet has changed the lending business, just as it has changed a lot of other aspects of life. You don’t have to go to a physical bank branch to apply for a loan anymore. Borrowers can quickly compare loan rates from different online lenders.
Even though this can make online lenders easier to use, it doesn’t mean that everyone should use them. The pros and cons of both banks and online lenders are listed below.
What Is an Online Lender?
In theory, any bank or credit union could set up a website and offer loans online. But “online lender” usually means a business that is not a bank.
Online lenders who are not banks can’t accept deposits from customers. They can only give loans, credit cards, and credit lines.
They don’t need a full banking license because they don’t have deposit accounts like savings accounts, checking accounts, etc. This means that the government is more likely to regulate banks and credit unions than online lenders.
Most online loan companies only offer a few types of loans. Some specialize in mortgages or refinancing mortgages, while others only do personal loans or lending between people.
The main things that make getting a personal loan from a bank different from getting one from an online lender are the application process, the lender’s focus, and (sometimes) what happens behind the scenes.
For example, lenders who only do business online may have an easier application process because it was made with online borrowers in mind. Some banks have also spent money on their online services, which make it easy to deposit money quickly and easily. But some may want you to finish the application in person at a branch.
Most online lenders only offer certain types of loans or work with certain types of borrowers. Some companies focus on helping people with bad credit or only offer personal loans, like loans to consolidate credit card debt.
On the other hand, banks may offer a wide range of financial products like checking accounts, certificates of deposit, mortgages, and credit cards. Even though some banks offer personal loans, this isn’t usually their main business, and the loans they do offer may only be for people with good credit.
Who Gives Out the Money?
Most bank loans are given out by the bank itself, which is another difference. This is different from some online companies that offer personal loans but aren’t actually lenders.
On the other hand, some platforms or markets just help people find lenders. These businesses don’t give out loans on their own. Instead, they help people who want loans find investors or banks that will work with them. Even though this might not seem like a big deal, you should still remember it.
You could also look into credit unions if you want a lender with a place of business. The law says that credit unions can’t charge more than 18% in interest on loans.
Since credit unions don’t make money off their loans, they usually have lower rates than banks. You have to join the credit union before you can get a loan from it. Sometimes, giving a small amount to a partner charity is all it takes.
How Long Will It Take To Receive My Funds?
When you are juggling financial hardship, it can be hard to get the money you need to buy something essential, pay a bill, or combine your debt. If you’re thinking about getting a loan for any reason, you might be wondering how long it takes to get a personal loan.
Personal loan approval depends on a number of factors, such as your credit score, the lender’s requirements, and how you fill out the application. In some cases, you might get approved the same day you apply, while in others, it could take up to a week.
Choosing Online Loans
At the end of the day, obtaining online loans can be fast and easy if you know where to look. By comparing a variety of different vendors, you can ensure that you’re getting the best rates available. Online loans typically are sent out to you much faster than traditional loans going through a bank.
If you’re interested in securing online loans for your expenses or investments, please contact us today. We would love to discuss with you which of our options may be best for you.