Personal loans offer individuals an easy way to borrow money that they can use; however, they see fit. Initially offered only by banks, it has recently entered the portfolio of many online lending platforms. However, many of these platforms have different financial structures than banks, which gives them considerably more freedom when it comes to how they set their terms and conditions. This can make it difficult to determine what risks and advantages come attached to a personal loan taken out from an online lending service.
Generally speaking, all online lending services currently in existence are safe to use because they are obligated to follow the rules and regulations that are similar to the ones imposed on regular banks. However, the fact that your personal and financial information is secure does not mean that one of these websites is as safe as going to your local bank and requesting a personal loan. This having been said, here is what you need to know when deciding which lender to choose:
What Is a Personal Loan?
Regardless of where you get them from, personal loans have largely the same conditions and limitations. This type of financing is usually unsecured, which means that you will not have to offer your property as collateral. Furthermore, there are no restrictions imposed on what you can do with the money. A personal loan can be used for home improvement projects, buying a new car, a new laptop, or repaying other types of debt.
It is important to mention that some lenders also offer larger, secured personal loans; however, these are more difficult to get and require a great credit rating.
What Are the Risks and Advantages of Using an Online Lending Platform?
Online lending platforms are subjected to the same laws and regulations as other lenders. However, they have more freedom when it comes to how they evaluate applicants. This brings us to the biggest advantage of these websites: they rarely perform credit rating checks. Those looking to get a personal loan from an online lender will only have to provide proof of address, proof of income, and a bank statement. This makes getting a personal loan from an online platform considerably easier and faster than it is from a bank.
The main disadvantage with these websites is that they have considerably higher interest rates when compared with banks and some also fail to disclose all the charges that you may have to pay if you miss or are late with a monthly payment. This may not seem like much, but it can easily double the cost of a loan compared to what you would pay at a bank.
Regardless of this, online lending platforms may sometimes be the best way to borrow money, especially for those who have low credit ratings.
Overview – Is it Better to Get a Personal Loan from an Online Lending Platform or from a Bank?
Yes, however, it can be better to borrow money from an online lender only if you have a low credit rating and know that banks would refuse you or give you disadvantageous terms and conditions. Lending websites go through requests faster, and some can even give you access to the money in under 24 hours. However, the speed with which they work comes at the cost of higher interest rates and a larger number of fees that you may have to pay, especially if you do not respect the terms and conditions to the letter.