There will come a time in your life when you’ll need to take out a loan to help you manage an expense, whether that’s to deal with an emergency or to buy a house. But have you ever thought about the various types of lenders you could choose from? There are two main types of lenders, traditional and online. To get a more comprehensive understanding, especially if you’re considering options for bad credit, you might want to explore resources like badcredit.co.uk. Below, we’ll take a closer look at the attributes of each type of lender to help you make your decision.
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What do we mean by ‘traditional lenders’?
A traditional lender is a bank or credit union that provides loans to both businesses and individuals. As well as loans, they offer a range of financial services that many of us will use throughout our lives. They may have physical branches on your local high street that the public can go to when they need help with their finances. These lenders offer a range of loans, from mortgages to personal loans, and student loans to name a few and can offer low-interest rates depending on your credit score.
What are the benefits?
There are a range of benefits that come with using a traditional lender, such as:
- Reputation: Traditional lenders will have established a reputation over the years with the community. They are trustworthy and show that potential lenders can trust them with their finances, and the advice they give.
- Variety of loans: As mentioned above, traditional lenders offer a variety of loans depending on your needs, so there is something to suit everyone depending on their needs.
- Low-interest rates: Traditional lenders like banks offer lower interest rates in comparison to other types of lenders, which means if you’re eligible you could save money over the total life of your loan.
- In-person support: If you need financial help, traditional lenders can provide face-to-face support to borrowers. This can be helpful if you need advice, or need to ask questions about which loan might be the best choice for you.
What is an online lender?
In contrast to traditional lenders, online lenders are separate from financial institutions like banks that offer financial services through online platforms. There are a range of online lenders to choose from offering a variety of different loans, with some of the most popular being short-term and payday loans, as well as personal and business loans. With such a range of online lenders to choose from, borrowers can decide which suits them best.
What are the benefits?
There is also a range of benefits that come with using an online lender to apply for a loan, such as:
- Convenience: One of the most notable benefits of this type of loan is that they’re convenient and easy to apply for. You can apply for a loan online without having to leave the comfort of your own home. You’re also able to track your application from the beginning to keep track of how it’s progressing.
- Fast application: Traditional loans tend to take longer to process, which is not beneficial if you’re applying for a loan for fast cash. Online lenders offer a quick and easy application process, with funds being deposited into your account in as little as 24 hours in some cases. Additionally, pre-approved business loans exist that are specially intended for certain endeavors, where lenders are particularly quick and diligent in their application and vetting processes.
- Flexible requirements: Traditional loans require a good credit score, which means if you’ve struggled to manage your money in the past, you may not be eligible. Online lenders base their decisions on affordability, so if you can show you can afford to pay back the loan, you will be able to benefit from the cash you need quickly.
Which is right for you?
Whilst there are benefits of choosing both online and traditional lenders, there is one key difference that could have an impact on which you decide to go for. If you have bad credit, it’s likely you won’t be eligible for a traditional loan – but online lenders may be able to help you. If you need money quickly, traditional loans may take longer to come through, so an online loan may be a better option. However, if you’re looking to take advantage of better interest rates, online lenders’ rates are typically higher, so a traditional loan would be the best option.
