Alternatives to Brick-and-mortar Banks

by admin on February 21, 2014

Brick-and-mortar banks and non-bank entities offer personal loans to customers. Lenders offer various types of products such as peer to peer and signature loans.


The choice between secured and unsecured loans depends on many factors such as the amount required, purpose, credit score, and others. Financial institutions and credit unions offer conventional mortgages, bridge financingPersonal loans, and other options. There are different assets to offer as collateral, for example, land, vacation or second home, and others. The presence of collateral means that banks take less risk because the asset is used to guarantee repayment. Unsecured loans are different in that borrowers are not required to offer collateral. Applicants with an excellent credit score are likely candidates for an unsecured loan. The choice of lender is also important – you may want to contact you local bank first if you are a regular customer. Another option is to apply through an online bank. They usually offer attractive terms and interest rates. Going to your local bank can be time-consuming. Online establishments effectively compete with brick-and-mortar banks because borrowers have the opportunity to review their interest rates and other terms.

Alternatives to Brick-and-mortar Banks

Peer to peer lending is one alternative whereby private lenders offer loans to pre-qualified borrowers. Lenders benefit from higher returns while borrowers enjoy a quick approval process. Depending on the platform, the loan amount varies as well as the types offered. In many cases, borrowers pay less in interest because lenders have less overheads. Among the main advantages are speed of funding, easy application process, and better chances of approval. Most lenders offer a fixed rate loan with a term of up to 5 years. Payday lenders also offer loans, but this is a last resort. While this is an alternative to traditional lenders, the interest rate is high. Borrowers with poor credit are considered risky which explains the higher interest rate. Individuals can apply for both private and government loans. In many countries, students can apply for government or federal student loans. One benefit of government assistance is income-based repayment plans. Another advantage for borrowers is that they are offered flexible payment solutions, along with extended repayment schedules. Unlike private loans which come with variable or fixed interest, the government offers a fixed rate. Repayment begins after you graduate or leave school. You qualify for federal assistance if you are enrolled full- or half-time, and loan forgiveness is offered in some cases. This option is not available for private loans which also offer higher interest rates. Loan cancellation and discharge is another example.


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