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When considering getting a personal loan, one should consider what is more important to them. Is it a quick application process or talking to a bank manager face to face? Technology has enabled users to get loans after clicking a few buttons to fill in their details. However, some borrowers still prefer the face-to-face experience of dealing with a relationship manager.
Whether one prefers online lenders or banks depends on various factors. These aspects include urgency, interest rate, and repayment terms. Borrowers should look at several lending companies before making a decision.
Banks Vs. Online Lenders: The Differences
Before settling on a preferred lender, there are various factors one should look at. These factors form key differences between bank loans and online lenders. Below are the key differences between these two personal loan lenders.
The Application Process
The key difference between banks and online loans is how borrowers apply and receive the funds. In this aspect, online lenders such as Digido have a significant advantage over banks. These lenders have been structured to maximize the convenience of the loan application process.
These online lenders allow borrowers to check interest rates and the limits one may qualify for. Additionally, borrowers can easily submit an application through the computer or a phone. They can also quickly upload the requested documents.
Apart from having a faster application process, these lenders can send out the personal loan on the same day the application was sent. It is all due to the streamlined digital lending process.
Unfortunately, bank loans have a longer application process that can span days or weeks as the process is primarily manual. These may be better for emergencies.
Fees and Interest Rates
Though online lenders have reduced overhead costs from lacking branches, they may not necessarily translate the benefits to borrowers. For this reason, one cannot bank on them to offer the lowest-cost option of a personal loan. Some online lenders add extra fees and have higher interest rates than bank loans. Notably, many online lenders also lend to users with riskier credit ratings. As a result, they add these charges, such as origination fees and others, to cover the potential risk.
Not all lending companies are the same; some have predatory lending practices. One should read the terms and conditions and other users' reviews before applying.
Regarding interest, banks have better rates and may offer fee discounts to existing customers.
Eligibility Requirement
Since banks offer better rates, they have very strict eligibility requirements. They also do not lend to very risky customers. Notably, online lenders have limited requirements. They also lend to borrowers with bad credit ratings.
Customer Service
Banks lead in offering the best customer support. If calling and engaging the bank becomes problematic for users, they can stop at a local branch to get faster assistance. Online lenders do not provide this face-to-face support; if they do, it's very rare. For this reason, users who are not tech-savvy can struggle to get proper assistance.
That's not to say they do not offer customer service. Many online companies have well-trained professionals who provide assistance via calls, web chat, or email.
Loan Products
Online lenders often focus on some sections of loans. They can provide specific personal loan products for borrowers to meet some needs. However, banks have a wider selection of loan products. Additionally, borrowers can open other accounts, such as savings and checking accounts, for other purposes.
Since banks have many available products, they can comfortably handle all customers' borrowing and savings needs. It is easier to track and manage finances when all deposit and loan accounts are in the same place. Having all these products with one bank also helps when negotiating for better interest rates.
How To Choose Between Online Lenders and Banks
The key differences between bank loans and online lenders can help borrowers determine which option to select. A borrower can choose an online lender if they want a loan quickly, have a bad or limited credit history or want a convenient application process. Digital loans have a completely streamlined application process and few eligibility requirements in all these cases.
However, a borrower can also select a bank when they want face-to-face customer support, can get a good interest and discount, or want to keep all their financial activity in one place.
When choosing online lenders, borrowers should be keen not to select predatory ones. Such lenders have very high fees, large repayments over a short duration, and aggressive solicitations.
Conclusion
There is no wrong or correct answer on whether to go for a bank loan or an online lender. It also comes down to the terms of the loan and a person's needs when they require the loan. Regardless of the options, one selects, it is advisable to read through the terms and conditions and shop around for attractive loans. The more choices one has, the higher the chance of getting a good deal.
Ross is known as the Pambansang Blogger ng Pilipinas - An Information and Communication Technology (ICT) Professional by profession and a Social Media Evangelist by heart.
