5 Things To Know Before Taking A Loan Online

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.

Loan Online

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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.

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.

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About the Author

Ankur Shah
Ankur Shah is the founder of the Value Investing India Report, a leading independent, value oriented journal of the Indian financial markets. Ankur has more than eight years of equity research experience covering emerging markets, with a focus on India and South East Asia. He has worked as both a buy-side investment analyst for a global long/short equity hedge fund and a sell-side analyst for an emerging markets investment bank. Ankur is a graduate of Harvard Business School. You can learn more about his latest views on global markets at the Value Investing India Report. -- He can be emailed at AnkurShah47@gmail.com