The lending industry used to be dominated by traditional banks and credit unions. But since the financial collapse in 2008, these lending institutions have tightened the strings, making it harder for individuals and businesses to secure a loan. On the upside, the demand gave rise to alternative lending institutions. And these lenders are much more willing to finance loans that banks would typically decline.
Alternative lending in a nutshell
Alternative lending is an umbrella term used to describe lending options that operate outside conventional banks. Frequently, you resort to these options when your loan application gets declined by a bank for any number of reasons. Another thing that sets alternative lenders apart from conventional loan sources is their innovative use of technology. In a review of Fiona finance, a marketplace for alternative lending, borrowers can apply and get the best offer from competing lenders within the platform. It is not only convenient, but even individuals with low credit scores may confidently apply.
The benefits of alternative lending
What makes alternative lending the better choice? Here are several of the benefits if you are considering to apply:
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- Quick and simple application process. You can apply using an online lending platform and get approved within minutes or hours. You will need basic financial information if applying for a personal loan, or details about your business if it is a business loan. Since most people today embrace technology, applying online is efficient, especially if you are always on the go.
- You can get financing even with poor credit rating. One of the reasons why these lending institutions operate is to give financing opportunities, even for those with poor credit ratings. If you get declined by a bank due to subpar credit, you may have a better chance with alternative lending.
- Flexibility in using the funds. Loans financed by banks and credit unions are more strict with contract stipulations on how you will use the funds. This is not the case with alternative lending. Typically, you have the discretion to spend the money however you see fit. Many people apply for financing to consolidate credit card debt, pay for student loans, and pay for personal expenses.
If you build a relationship with a particular lender, it is also possible to get better offers and rates over time.
Considerations before applying for a loan
Indeed, there are many benefits to alternative lending. But, like any financial commitment, you need to be aware of some considerations. Since these lenders also offer unsecured loans, interest rates may be a bit higher. It is understandable considering the risk of financing without security.
You also need to exercise precaution, especially when applying with a relatively new lender. To ensure that you apply using a reliable financing company, use a well-established lending platform to connect you with some of the best lenders out there.
Lastly, be wary of additional charges. Exercise due diligence by inquiring about the fees and reading all the terms and conditions before signing on the dotted line. This way, there will be no surprises with your first payment.