When looking for a suitable loan with low-interest rates, one is often faced with the question: bank or online loan?
Even though banks have increasingly opened up to the idea of personal loans, they are still reluctant to unsecured personal loans. At the same time, more and more online lenders are entering the market, attracting attention with easy application and tolerant loan terms. But what exactly are the differences between traditional bank loans and the new online loans?
Advantages of In-Person Loans
The main benefit in-person loans have is the personal face-to-face service at your local credit union — that cannot be imitated digitally. Even though many online lenders already offer video-based contact opportunities and 24-hour telephone customer service, the face-to-face conversation remains unique. Sitting over coffee with your trusted banker in the impressive halls of a bank, designed to demonstrate security and consistency, is something no online lender will be able to offer you. A long-standing relationship with your credit union can also result in higher approval rates or more favorable terms.
Downsides of Personal Loans from a Bank
The coffee in the bank, however, does not come without a negative connotation. Often, the cost of operating branches is passed on to customers in the form of higher rates or processing fees. And for those who are not yet a permanent borrower with a credit union, the pre-qualification process usually affects your credit score. Because of the traditionally paper-based process and the precise selection of borrowers, credit unions are often accordingly slow. Loan approval and disbursement can take several days or even weeks.
Benefits of Online Loans
Probably the biggest advantage of looking for personal loans online is the almost endless offers. Whether you are looking for a personal loan with low monthly payments or without a credit score check, there is a perfect option for everyone. The amount of different personal loans has spawned a multitude of comparison portals. It has never been easier to compare online loans.
In addition, online providers score high on speed and efficiency. Thanks to digital data processing and approval procedures that are often controlled by algorithms, the money is usually in your account within hours after applying. This does not only save a trip to the bank but is also simply convenient.
Unlike traditional lenders, many online lenders offer free pre-qualification, which does not affect the credit score. Not having representative branches and low operating costs can mean lower monthly payments and interest rates for online loans.
Disadvantages of Online Personal Loans
As the complete process from loan application to approval is fully online, it requires a certain familiarity with digital media.
Because the process usually takes place without personal contact, you should also be familiar with filling out forms and personal financial information.
The aspect of security cannot necessarily be seen as a disadvantage of online loans in this context. On trustworthy comparison portals, the seriousness of the providers is guaranteed.
In-Person Loans vs. Online Loans Take-Away
|personal service on site
advantages through long-lasting credit relationship
|wide selection of loans
options can be compared quickly and easily
convenient application from home
pre-qualification with no credit score impact
faster loan approval and disbursement
lower interest rates and costs for consumers because of lower operating costs
|pre-qualification affects credit score
operating costs are passed on to customers
long waiting times due to analog processing
|applications and submission of personal data must be done independently
This article is for educational purposes only and is not intended to provide financial, tax or legal advice. You should consult a professional for specific advice. Best Egg is not responsible for the information contained in third-party sites cited or hyperlinked in this article. Best Egg is not responsible for, and does not provide or endorse third party products, services or other third-party content.