Since the 2008 financial crisis, many banks have tightened restrictions on their lending criteria, making it more difficult for borrowers to obtain loan approval. Although there are many reasons for this, people are now turning to non-traditional ways of getting approved for loans. One example is online banks, which are more than happy to lend where the big, traditional banks won’t.
Here is a closer look at the expectations versus the reality of choosing online loans.
Approval process timeline
Waiting: The loan will take weeks or even months to be approved with a lengthy application process.
Reality: Online banks are known for their speed and convenience when it comes to regular banking transactions, and this affects their loan approval process. Instead of having to go to a bank branch, you can apply for a loan from a computer or smartphone, at your convenience. The request may include a credit check or an income check. Online banks can even use algorithmic application review, which could get your application approved in minutes.
Online loan relationships
Waiting: The online lender won’t care about me or my online loan. The lender can engage in predatory or dangerous lending behavior, and they are there to charge me outrageous fees.
Reality: Online lending relationships with non-traditional lending platforms, including online banks, have made it easier for people who would never have had access to a lending platform otherwise. The relationship between the bank and the customer is now much easier. The customer can now easily access the bank, and obtaining credit is much more accessible.
Waiting: Online banks are trying to charge outrageous fees, or will charge me outrageous interest rates.
Reality: Because online banks don’t have as much overhead as traditional banks, it costs a lot less to run the bank. Therefore, many online banks will pass these savings on to their customers and offer much lower rates.
Waiting: Online banks don’t really care about me, so they won’t offer any additional benefits.
Reality: Like any other business, online lenders compete for their customers. Hence, you will find random perks that are offered.
Allied bank (NYSE: ALLY) reimburses you for your loyalty. If you get your home loan with them, they’ll pay $ 500 in closing costs if you already have an account with online banking. SoFi offers unemployment protection, which suspends your loan if you lose your job through no fault of your own. The company even offers career coaching to help you find a new job.
Online banking can be a great way to find a low interest loan that is convenient and easy for you. Getting a loan online can be a hassle-free process without having to skip any steps or pay high interest charges.
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