The lending market has changed significantly since online lending platforms entered the scene. Borrowers now have more options not only when it comes to loan products, but most importantly, in choosing a lender. For those who are looking to qualify for a personal loan, online lenders are becoming a more attractive option because of the promise to get approved in less time. Who wouldn’t want to forego the hassle of meeting with a loan officer or lining up in a bank only to get denied?
But before you write off applying for a personal loan in a traditional bank, let us take a closer look at the key differences between these two options. This way, you can better decide which route is more suited based on your current circumstances and financial needs.
How does an online lender differ from a bank?
Many people assume that with an online lender, you only get approved for smaller loan amounts. While it may be true sometimes, there are lenders today that can extend a higher amount to borrowers that qualify. In this Lightstream review article, you will learn that borrowers with good credit may get approved up to $100,000. With this amount, you will have an opportunity to finance significant personal expenses such as pay off debt, finance a wedding, remodel your home, or even to fund an investment or business opportunity.
What sets online lenders, apart from traditional banks, is the application process. Since the transaction is conducted online, you eliminate the hassle of preparing and filling out paperwork. In some instances, a single online form and a look at your credit rating are sufficient to get a loan. But in addition to convenience, there are also other notable differences in applying for a personal loan online than in a bank.
Online lenders are more willing to offer unsecured personal loans
Ever since the financial crisis of 2008, banks reduced consumer lending. Even now, banks will likely advise that you 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 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 in the past several years. These days, there is peer-to-peer lending available, where individuals fund your loan and earn interest in the process. The structure remains the same where the borrower still needs to qualify and submit requirements. But, this model, along with a fresher perspective on how loans get approved, is giving the market its boost.
Online personal loans often have lower fees
Online lenders can afford to charge lower fees because operational costs are also lower. Depending on the type of loan, you can also qualify for lower interest rates. However, for an unsecured personal loan, the rates may be slightly higher because it also exposes the lender to more risks. Nevertheless, one upside 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.