It’s true that online lending is a much-needed alternative to offline lending. Banks and private lenders have strict criteria for any individual who needs a loan regardless if the individual wants it for themselves or their business. Credit score plays a big role in loan application approval and not all businesses and people have a good credit score. And yet both types of lenders still have plenty of customers. Is there really a difference?
The Availability Factor
Banks and private lenders have fixed working hours. During that time they will accept a certain amount of loan application. You also can’t just walk into such an institution wearing your sweatpants and a hoodie. You have to look presentable otherwise you’ll look unprofessional. Unlike them, online lending platforms require a bit of your personal information so you can create an account at their site. You just log into it and you’re set. You deal directly with the lender which one of the benefits of peer to peer lending. Oh, and you can apply for a loan anytime.
The Speed Factor
How long does it take a bank to review an application? A day probably, but it needs a lot more than that to approve the money for your loan and send them to your account. If you’re in a hurry they put you in a more stressful situation. If you pick any online lending business instead, you’ll see that your application will be reviewed in a matter of minutes and within 24 hours the money will be transferred to your account. The lending criteria is another thing that separates online and offline lenders. Online ones usually don’t have such strict criteria and offer favorable terms to those with a bad credit score as well.
The Terms
Online lenders are good for those that are in need of a loan since all online loans are unsecured loans. There’s no collateral for the lender so they take a risk by lending anyone the money. The thing about online lenders is that they’re more open to risk since they offer good terms to those with a good and a bad credit score.
When it comes to unsecured loans, also known as personal loans, the interest rates are high for any amount of money borrowed. This might be something that those with a bad credit score aren’t looking for since no one wants to pay more money than they borrow. However, despite the high rates, every loan has fixed rates that aren’t influenced by the ups and downs of national financial markets.
The Verdict
If you’re looking for a personal loan then your first stop should be an online lending platform. They have less strict criteria and will give you a better chance of getting a loan even if you have a bad credit score. If you’re looking for a more traditional approach to loans then you should turn to banks and private lending companies. When it comes to the processing time and availability offline lenders are outmatched by online ones. In short, it all depends on your situation.