Online or in-person loans: what could be better?
More and more fintech companies are offering personal loans online. But whether an online or in-person loan is best for you, it depends on what you value the most.
If you prefer a face-to-face experience, go for a traditional brick and mortar bank. If you want fast financing and other modern conveniences, an online lender may make sense.
Whatever your preference, the best choice of lender is usually the one that offers the lowest interest rate. Always compare the offers of several lenders to get the loan that best suits your needs.
Online loan vs bank loan: advantages and disadvantages
Here are five questions to ask yourself when choosing between a bank loan and an online loan.
Are Online Lender Loans Safe?
Loans from online lenders are as safe as loans from big banks, provided the online lender is reputable.
A reputable lender, online or otherwise, usually checks your credit, discloses the costs and terms of the loan, and verifies that the loan will not ruin your finances before approving your application.
Would you like to pay for a personalized loan service?
One of the obvious differences between banking and online lenders is the face to face exchange that you can have in a physical bank.
If you value the personal interaction and the security of knowing who is handling your loan, a bank might be for you, says Eric Simonson, a certified Minneapolis-based financial planner and owner of Abundo Wealth.
“Some people just like to know that there is a… person who makes sure the loan goes well for them,” he says.
Additionally, you may have the option of negotiating a lower rate or qualifying with a lower credit score if you talk to someone you already have a relationship with at a bank, Simonson says.
But the personal touch can come at a premium, says Certified Public Accountant Kyle Jackson of Oklahoma. He says traditional banks tend to pass operational costs on to consumers that online lenders don’t, which can lead to higher rates or fees.
How fast do you need money?
If you need a loan quickly, online could be the solution.
Online lenders – and traditional banks with an online option – can sometimes process an application and make a decision faster than banks that don’t have an Internet presence, Jackson says.
Some of these lenders can fund the loan on the same day of application or the next business day.
Lenders online can also speed up your research process if they publish their rates, says Todd Nelson, senior vice president of LightStream, the online lending arm of Truist Bank.
“If you have good credit, you don’t really care if you’re going to be approved,” he says. “What worries you the most is, ‘Am I going to waste my time asking for a loan and getting an offer that I don’t want?'”
Are you comfortable with an online lender?
For an online loan application, you will need to electronically share information such as your social security number, educational background, and bank account information, which may require granting access to the lender.
Especially in these cases, beware of crooks. Wisconsin-based CFP Ben Smith with Cove Financial Planning says that if you’re not sure you can tell if an online lender is legitimate, the safest option would be a physical bank.
Managing a loan online, which usually means your only contact with the lender is through a customer service representative, can be difficult for people who are not financially or technologically savvy. , Jackson said. If this is you, the online-only experience may not be right for you.
Where to get the best loan?
Whether it is an online lender or a bank branch, the best loan is one whose costs, terms and characteristics match your needs. Comparing multiple offers from bank and online lenders can help you get the best value for your situation.
Simonson says that if you have less than desirable credit or are looking for a loan for some non-traditional reason, a community bank or credit union might be more willing to take the risk of lending you than a large bank or lender. in line. .