You may or may not have come across the hot commodity in the lending and borrowing market: online loans. Online loans are becoming a popular option for many consumers in Canada for very good reasons. Online lenders have many fresh ideas for how they do business which benefits consumers immensely in conjunction with many other advantages. Before deciding if an online loan is right for you, take the time to learn about what they are, how you can benefit from them, and how they work.
Let’s face it, borrowing can be a time-consuming process, particularly with traditional lenders, such as banks. You may have to take time off work to make multiple trips to the bank during the application process and, once your application has been submitted, it can take a while to know whether you’ve been approved or not.
On the other hand, online loan applications can often be done from the comfort of your home at any point in time. In addition, you will know almost instantaneously whether or not you’ve been approved for financing. In comparison to banks and other traditional lenders, online financing is immensely simple and quick.
For individuals interested in an online loan, consider using a platform that allows you to research different loans and lenders. The benefit of using a platform with these features is you can easily and rapidly compare a wide selection of creditors and financial products. Loans Canada has its own online platform for viewing, researching, and comparing lenders and loans, consider using our platform today to help you find the right online loan.
The thought of applying for a loan online can make some people cringe. When dealing with finances, there is a certain comfort that comes with working alongside a trained person from a renowned lending institution such as a bank. This may be why online loans haven’t gotten the excellent recognition they deserve yet. Once consumers overcome dealing with a website instead of a person, they will understand how beneficial online loans really are. Before eliminating an online loan from your financing options, consider the list of benefits below.
Something people don’t often realize is online lenders have a competitive advantage in the lending market because of their low overhead costs. Online lenders don’t need to pay for a physical branch like banks and credit unions do. For this reason, online lenders don’t need to charge as much interest and fees as others in the market do. The interest rates and service can be more competitive and lower than other lenders in the market.
Three times you should use a personal loan instead of a credit card.
The approval process for online loans is basically instant. Within a very short period of time, you will know whether or not you’ve been approved, how much you are able to borrow, and the cost of your installment payments. While banks usually offer online applications, it can take quite a long time to hear back because a person within the institution needs to review it.
A great thing about online loans is they’re rarely secured by collateral (click here to learn more about collateral). In simpler terms, you don’t need to pledge assets, like your home or car, to obtain financing. Without collateral, the borrowing process is much safer for the person taking out credit because they aren’t risking losing their precious assets in the event that they default on a loan. There will be other repercussions to defaulting on a loan, like a serious hit to your credit score, but at least you don’t have to worry about losing your assets.
Banks and other traditional lenders don’t like risk which has caused them to be conservative on who they lend money to. This isn’t a problem for individuals with amazing credit, but what about other individuals who still need financing? Unfortunately, those with poor credit or in the process of building credit won’t have much luck with traditional lenders. The good news is online lenders are more likely to help out individuals lacking amazing credit. Usually, online lenders will use other information to evaluate creditworthiness such as income and bank statements.
On the surface, payday loans seem like a great idea. However, it is easy to be deceived by payday loan lenders because they prey on individuals who need quick cash and don’t have time to think slowly about the loan decision. That being said, payday loans can be the right choice for some, so long as you know what you’re getting into and consider the conditions carefully.
A payday loan is a high interest loan with a short repayment period. Their purpose in the market is to supply extra cash to consumers between pay cheques, usually for an emergency. Typically, payday loans are marketed toward people who have challenges making ends meet month to month.
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There are many reasons that payday loans have a bad reputation in the industry. The first, and arguably most critical reason, is using payday loans can result in a downward cycle into debt. Because they are meant to be extra cash between pay cheques, people often begin to rely on the loans to pay their bills and other living costs. The reliance on payday loans for regular living expenses becomes problematic because individuals can’t pay the loans they took out or end up taking out more loans to cover their costs. This becomes a cycle very easily eventually leading to excessive debt.
Other reasons include deceptive lenders and confusing terms. Payday loan lenders prey on individuals who are desperate for cash. Desperation makes people think unclearly meaning you’re willing to believe you found an amazing deal when really you’re being deceived. Finally, it is extremely challenging to pay back a payday loan on time when you’re already struggling financially. Once you miss a payment, interest will accrue rapidly which you will owe on top of the principal. Many fail to understand how difficult it is to repay payday loans on time and how high the interest rates are relative to market standards.
The best alternative to payday loans is a short term personal loan from an online lender. This type of loan will have flexible installment payments, a lower interest rate, and a highly personalized service. In addition, you’ll have more time to research and compare lenders and financial products by using an online lender. Keep in mind that payday loans are offered online too, make sure to do a quick Google search on the lender before sealing the deal.
Before you apply for a payday loan, always know your rights.
Once you’ve finished all your research on lenders and financial products, the actual application for an online loan only takes 10 minutes or less. Once your application is submitted, you will know if you’ve been approved right away. Sometimes you may have to wait a couple of days if the lender requires additional information, but either way, the approval time is much quicker than a bank or other traditional lender.
There have been a lot of changes in the lending and borrowing industry in the past decade, many of which are positive changes. Online lenders are a relatively new entrant into the market compared to banks, but that doesn’t mean they don’t have excellent ideas or have lacked contribution to the industry.
After the financial crisis in 2009, banks and other traditional lenders became conservative on who they give money to with the notion of protecting themselves from another economic downturn. The conservativeness of traditional lenders has made it easier for other lenders to enter the market which is precisely what they have done through online lending. The amount of online lenders has grown exponentially since 2009 and continues to grow to make personal unsecured online loans readily available to consumers.
A hard credit check can damage your credit score. Banks and other traditional lenders absolutely do a hard credit check on every loan candidate because it is a major part of their due diligence. Online lenders typically do not do a hard credit check, they use other information to determine your creditworthiness, which will save your credit score. Also, you can take more time to find the right lender since you don’t have to worry about hard credit checks.
As a result of new lenders entering the market, a lot of creativity and innovation has been introduced to the industry. There are more ways you can lend and borrow money than ever before. Prior to this change in the market, virtually your only option was obtaining financing from a bank or similar institution. It is exciting to know that you’re not tied down to such a conservative lending institution anymore and have other options for financing.
One example of innovative lending and borrowing method is peer-to-peer lending. How it works is there’s an online lending platform where individuals can lend money to other individuals and earn interest. Of course, you still need to qualify for this type of lending, but it is a fresh perspective for the industry as a whole. It also sparks inspiration for others who have creative ideas for the lending and borrowing industry which means more positive change is to come.
If you’re looking for financing, it is wise to shop around and seriously consider online lenders as an option. Take a hard look at your current financial state and financial goals to determine if online lending aligns with your financial needs. If you decide that online lending is for you, Loans Canada can help match you with the right online lender and financial product today.
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Veronica is a writer who specializes in creating unique and educational personal finance content. She has extensive experience writing blog posts for companies in the financial sector. Veronica's background is in accounting as she graduated from Western University in 2017 with a degree in accounting. She is passionate about using her accounting expertise to help others with their personal finance questions and issues and enjoys using her writing to educate Canadian readers. When Veronica is not writing, she enjoys film, reading, travelling, going to the gym, and listening to music.
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