Most individuals will have to take out a loan at some point during their adult lives. You may need the money in order to pay medical bills, to buy a home, or go on a trip around the world. Regardless of the reason, our society is built to incentivise us to borrow money from lenders. Up until a couple of decades ago, the only way to legally get a loan was to go to the bank. However, the development of the online medium has led to new financing possibilities.
Online lending platforms are relatively new, but they are quickly growing in terms of popularity. This is mainly because they offer considerably more flexibility than banks, in terms of eligibility requirements. However, this comes at the price of a higher interest rate. So, when is it better to get an online loan rather than a traditional one? Here is what you need to know:
The Low Cost of Traditional Loans
Traditional loans are usually great if you need to pay for expensive products such as a car, a professional digital camera, for medical procedures and treatments, or home renovation projects. These are great because they have low-interest rates, very transparent terms and conditions, and can be refinanced quite easily. Furthermore, almost any aspect of the deal can be negotiated with the lender, which makes them highly flexible. There is also a very wide variety of traditional loans available, some of which are not accessible through online platforms.
Unfortunately, all lenders will check your credit rating before giving you a loan. If your rating is low, they may give you a higher interest rate or refuse your loan request.
Accessible and Care-free Loans
Online loans such as payday loans are a relatively new concept. However, they are extremely popular as a result of their high flexibility. Getting an online loan can take as little as 24 hours, and most lenders will not perform a credit rating check if you borrow small amounts of money. This makes them great if you need £500- £1000 in order to pay the rent or pay for medical treatment.
The downside is that they come with short terms, which means that although you get the money in 24 hours, you will have to repay it fairly quickly. Some loans can be repaid in one-three months or less. It is also important to mention that there are no restrictions imposed on what you can do with the money, and most loans won’t affect your credit rating.
When Should You Choose an Online Loan over a Traditional One?
Online loans are great if you need money urgently. The requests are processed very fast, and you will get the money in under 24 hours. This makes them great if you need to pay bills or to replace your smartphone. Furthermore, you can apply for a loan, get the money, and return it without having to go to any meetings or fill out physical forms. Everything is done through the lender’s website.
However, the limitations that they carry in terms of cost and term duration make online loans impractical for large expenses or projects such as home renovation projects or expensive trips abroad.
In most cases, you will get the most use out of online loans if you use them as credit cards. Both come with high-interest rates; however, unlike the latter, borrowing money from online lenders is not reported to credit registers, which means that it won’t get market in your permanent financial records.