Personal loans: lenders or online banks
The lending market has changed considerably since the emergence of online lending platforms. Borrowers now have more options not only when it comes to loan products, but more importantly, when 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 getting approved in less time. Who wouldn’t want to give up the hassle of meeting with a loan officer or waiting in line at a bank to get turned down?
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 most suitable based on your current situation and 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. Although this may be true at times, there are lenders today who can grant a higher amount to borrowers who qualify. In this Lightstream review article, you will learn that borrowers with good credit can be approved for up to $100,000. With this amount, you will have the possibility to finance important personal expenses such as paying off a debt, financing a wedding, renovating your house 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, a single online form and a review of your credit rating is enough to obtain a loan. But besides convenience, there are also other notable differences between applying for a personal loan online and at a bank.
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Online lenders are more willing to offer unsecured personal loans
Since the financial crisis of 2008, banks have reduced consumer credit. Even now, banks will probably advise you to get a credit card instead of applying for an unsecured personal loan. Online lenders, meanwhile, are stepping up when it comes to offering consumer products. Not only that, but online lenders have also made the process much easier for applicants.
Online lenders are more creative in their approach
The online lending approach has become more creative over the past few years. These days, there are peer-to-peer loans, where individuals fund your loan and earn interest in the process. The structure remains the same where the borrower still has to qualify and submit requirements. But this model, coupled with a fresher perspective on how loans are approved, is giving the market a boost.
Online personal loans often have lower fees
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Online lenders can afford to charge lower fees because operational costs are also lower. 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. However, an advantage here is that online lenders often have fixed interest rates, which helps you manage your payments because the interest does not fluctuate depending on the current financial situation.