The terminology related to loans can get quite confusing and most books, websites and even vlogs tend to use industry jargons or vague wording to describe most terms. So to start of it, let’s first describe what is referred to, here, when we say “Direct Lender”, “Online Direct Lender” and “Conventional Direct Lender”.
When we say “Direct Lender”, we, in simplest English terms, essentially refer to an entity you can get a loan from, which shall be the entity that is giving you your loan money. No brokers, no third parties are involved in such a scenario and your loan is coming straight to you, with no entity making a commission on it.
What we refer to as “Conventional Direct Lenders” here, are lenders of loans from banks and loans from registered individuals/companies that can be availed through stores in your neighborhood, pawn shops, etc.
What we refer to as “Online Direct Lenders” here, are lenders that operate primarily online and are essentially non-institutional. Banks that can offer online disbursements of loans are excluded as their currently their online processes mostly tend to be an online-converted extension of the usual conventional process.
The main difference between what we are referring to as Conventional Direct Lenders and Online Direct Lenders, would be that one would have to step outside their house/office and submit some sort of paperwork or have a pre-existing relationship where the paperwork was done in the past, and this also possibly shall add to the need for the borrower to look around store-to-store in the first place, in order to get the loan that they seek.
Now that that’s out of the way, let’s jump straight in.
Choose Bank Loans when there’s no hurry, Paperwork is not a problem and your Credit Health is alright
Assuming that you’re not looking for a very short term loan, bank loans, bank loans could be the preferred choice. If you are looking for very short term loans, we cover that in the section where we discuss payday loans.
It’s simple – unless you know the market, the safest bet in a loan is a bank loan, as long as you can take that option. The Conventional Direct Lenders include banks and non-bank lenders. But to get a loan from a bank, you need to be aware that these limitations almost always exist:
• Bank loans usually have long application processes and typically a fair amount of paperwork is involved at some stage. If you have an existing account with the bank, the paperwork might be lesser and in very rare cases, you might have a choice of an online process. Such a loan may tend to be more expensive than the typical bank loan.
• Bank loans also typically take days and sometimes even weeks for approval and then deposit.
• It’s almost always the case that you would for some reason or the other, have to drive down to the bank a time or two sometimes even more) for completing the loan application/process.
• If you have a poor credit score, you’re likely not simply be rejected for a bank loan.
• Loans form a bank without a collateral may be available only to people with a good credit score and good financial health.
The advantage of the bank loans is that the interest rates are very frequently lower and that banks are usually the most reliable companies as long as it’s certain that your loan is getting approved.
Choose Online Direct Lenders if Bank Loans aren’t Right for you
When you’re in a need for money, and a bank loan is not an option since you’re in a hurry or do not wish to run around for paperwork or have been rejected by a bank or are in any other scenario that deems a bank loan not the right choice for you, you have to look for registered lending individuals or companies.
In the earlier days, Direct Lenders apart from banks, were almost exclusively approachable through brokers or pawn shops and some other stores/offices that lenders operated from. It was hard and probably impossible to know how a lender could be trusted. It was equally hard to compare the deals that these lenders offered. To add to this, the regulations were not stringent enough for it to be safe to borrow money from such lenders, in most states.
However, in the recent years, a lot of options have become available online. As this helped the business grow, the industry became significant enough to attract stronger and better regulations. To add to that, the online platform being easily accessible to everyone, made the lenders (especially the ones who operate primarily online) work more professionally, or suffer from negative online comments and feedback. This is the key reason why it is wise to choose reputable Online Direct Lenders, if a bank loan is not the right option for you.
In short the key advantages of Online Direct Lenders are:
• Tend to offer quick and easy solutions, often without a need for paperworkrn• Have quicker application and approval processesrn• Are often more trust-worthy than non-bank Conventional Direct Lendersrn• Tend to offer more competitive dealsrn• Ease of access and application – every step related to the loan can often be done completely online, even from your mobile devicern• Some loan options are available to borrowers with bad credit history and some can come without even a credit check processrn• Loans can be very flexible – at times available with very precise amounts that you need and at times also available in very short term optionsrn• Aware consumers can easily look for signs that show that the online lender is genuine – Eg. BBB Accreditation, genuine contact details available on the website, etc.
rnA Note about Payday LoansrnPayday loans are available from some non-bank direct lenders. There are typically intended to be very short term loans, where you borrow a small amount of money from the lender and pay the lender back with added charges, in a matter of 7-14 days (sometimes up to 30 days), ideally on your next payday.
They usually have a high percentage of interest in terms of APR, but if you need money just for a short time, the absolute amount that you end up paying as a charge for borrowing the money, might be smaller than that of a longer term loan.
As above, Payday loans being non-bank products, are preferable taken from trustworthy Online Direct Lenders.
rnConclusionrnTo wrap up, we could summarize that the strict and elaborate bank loan is worth it when it’s okay to wait for one and you qualify for one. You as a borrower, would be the right person to judge if the bank loan isn’t right for you. In such a case, Online Direct Lenders are the better bet over Conventional Direct Lenders and there are rather straightforward ways to tell apart trustable online lenders from fake ones. It is important to do a little homework before you finalize a loan.
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