If you’ve looked around for a loan online, you’ve probably had results that had nothing to do with traditional banks or financial institutions. There’s simply no mention of Wells Fargo or Citibank on the search results for personal loans. That’s because the financial world has been turned upside-down after the global financial crisis of 2008-09.
Now, niche financial companies and specialist loan suppliers such as CashStop, provide easier access to small business and personal loans. Some of these businesses cut back on overheads by keeping their operations exclusively online. If you’ve considered taking a personal loan online here’s what you need to know:
1. More accessible
Smaller, newer financial firms have stepped in to fill the gaps left behind by traditional banks since the crisis. This makes financial products like mortgages and loans more accessible. Most of these companies are willing to lend regardless of bad credit or a lack of credit history. The new found accessibility may be the most important feature of these new financial services and online lenders.
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2. Tailored products
Another way alternative lenders are setting themselves apart is by offering unique financial products. You can tailor the specifics of the loan, such as the timeline for payback and the purpose of the loan. Businesses can use everything from inventory to invoices without the need for a personal guarantee. This sort of flexibility is immensely valuable when you run a business with unpredictable cash flows or if you need a personal loan for an emergency.
3. Pricing Variety
The pricing structure of online loans is also somewhat different. The pricing strategy isn’t standardized the way it is in traditional banking. You’ll need to pay attention to the fine print to understand how your service provider intends to charge you. Whether the payments are amortized monthly or weekly. Whether the effective annual rate is as attractive as you expected. Short terms loans can be deceptively expensive. Check the annual percentage rate (APR) of the loan regardless of what’s on the marketing material.
4. Less Regulation
Alternative lenders and online loan providers are not regulated by the FDIC the same way as traditional banks. Make sure you’re taking a loan from a trusted provider. Also, make sure the loan terms are fair and you have wriggle room in case things get complicated later.
5. More awareness
The lack of regulation means alternative online lenders have more flexibility to provide custom lending solutions. They can be as innovative as they want with these financial products. However, you need to be more careful when dealing with an online lender. Look into their history, get assurances from the company, and do your best to educate yourself about their business.
Since the financial crisis, alternative lenders have sprung up online to fill the gaps left by traditional banks. Small businesses and people who can’t access traditional financing can turn to these lenders to bridge their capital needs. However, read the fine print and educate yourself about the industry before you try taking a loan online.