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The Great Debate: Banks or Online Lenders

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The Great Debate: Banks or Online Lenders

Historically, a bank was where you went — in person, no less — when you needed a loan. But a lot has changed since those bygone days of bank-only lending. With the rise of digital spaces, online lenders now offer personal loans over the web. 

A bank isn’t the best option simply because it’s tradition, nor is an online lender the better way because it’s new. Each option has its strengths and weaknesses, which you can explore below. 

This comparison joins the many tips when applying for a line of credit that ensure you make an informed decision tailored to your needs and preferences. 

Online Lenders: Streamlined and Specialized

  • Simple Application Process: An online lender has built an online application into the foundation of its platform. You can submit this application over the web quickly and easily, provided you have the financial info you need to supply. Many online lenders rely on automated apps so you can find out if you qualify very soon after you submit your information. This speedy action on a lender’s part can help you deal with your urgent expenses faster.
  • Specialized Loan Offerings: An online lender typically focuses on a type of loan, like short term personal loans or lines of credit, making them experts in what they do. They may also cater to specific kinds of borrowers, like people with less-than-perfect credit scores. This specialization can help you find a more tailored option for your unique needs. 
  • Lending Marketplaces: Not all online lenders underwrite their own loans; they might instead be a platform that connects borrowers with another financial institution that provides funds. 
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Banks: Familiar Brands and Diverse Offerings

  • Varied Financial Products: A bank offers much more than one line of credit or personal loan. These large financial organizations provide a full suite of products, including chequing accounts, mortgages, and credit cards — to name just a few. Personal loans may not be their focus, even if they offer many different types. 
  • Eligibility Requires: Every lender assesses your creditworthiness to determine whether they should issue a loan — whether it’s a bank or online organization. This determination may include looking at your credit score, earnings, and current debt. However, a traditional bank might also look at your past history as a client. If you have your chequing account and investment funds with them, these products may be a factor in your next loan. 
  • In-Person Services: While online lenders do most of the lending process over the web, it’s possible that borrowers might have to come into a physical location at some point to sign something or verify their identity. These processes are unique to the lender and relatively rare. A bank, on the other hand, allows borrowers the convenience of in-person applications, offering face-to-face consultations and personalized support at any step of the process. You might also be able to access your account from ABMs across the city. 

Choosing the Best Option for You

You might not care how much an online lender differs from the big banks if you’re looking for the most favourable terms. However, knowing what you get from either option can help you anticipate the borrowing experience. 

Ultimately, you’ll have to comparison shop, looking at qualification requirements, loan amounts, and fees to determine what works for you.

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