Personal Lender vs Bank: Which One Is Better for Your Money Needs?February 08, 2019
It’s hard out here for a small business.
Obtaining bank loans has always been difficult for entrepreneurs trying to fund their future enterprise. More of them turn to online moneylenders to get the ball rolling, due to less rigid requirements.
But is this the better way?
Before you decide between lender vs bank, you need to educate yourself on the implications of both.
Traditional Bank Loans
The financial crisis of 2009 had a massive impact on the money lending tendencies of financial institutions, the reverberations of which are still felt today.
A small business typically has a tough time going through the traditional bank loan process. This results in many of them immediately abandoning the idea altogether.
The business generally has to be at least two years old and possess an impossibly high credit score to qualify for a bank loan. This qualification process eliminates brand new endeavours at the outset.
In addition, you’ll have to provide highly detailed business plans with business summaries, financial, and investment info. It’s a lot of paperwork to do and a lot of personal information given over to the bank for a maybe.
Upon completion of your application, it can take the bank weeks or months to get back to you with their decision. If it’s not the decision you want, you’ve wasted a lot of time and effort trying to get this bank loan.
These intense regulations have their downside during the application process, but they protect you in the long run if you’re successful and interest rates could be lower.
As we’ll learn, obtaining an online line of credit is usually much less pain-staking, but there is a downside.
Online Personal Lenders
Where the traditional bank loan application process zigs, online lenders zag.
As banks pulled back from personal loans, online lines of credit stepped out of the shadows. Offering a much less complicated and rigorous application process, online lenders provide a hassle-free service to those in need of capital.
Instead of putting on your best suit to look the part at your bank, you can apply for an online loan anytime in your trousers. The regulations and credit checks are far less stressful as well.
This has major upsides for an entrepreneur. Instead of waiting weeks and months to get your loan, you could have the money overnight if everything breaks right.
Traditions are thrown out the window with online money lending. Websites now offer P2P lending, where individuals are able to give out personal loans to other individuals and collect interest.
Qualification is still required, but the walls blocking those with bad credit from successful loan applications are being knocked down with online lending. Loans are given out based on education level and some allow for family members to cosign on certain platforms.
The one big downside of online lending is that loans are unsecured. Unsecured loans are much riskier for the lender, thus interest rates can be much higher than traditional bank loans. But not always.
The Verdict of Lender vs Bank
Unequivocally, online loan lenders provide you with a much less painful application process than traditional banks. Those with low credit scores shouldn’t think twice about lender vs bank; an online lender will work better for you.
Research should be done when looking at online lenders. If you’re in good standing with credit card companies and you are a veteran business, it may be beneficial to you to go with the lower interest rates of a traditional bank loan.
Which type of loan is better for your money needs is circumstantial. Look into every option when searching for a loan and make an informed decision on which you should apply for.
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