Whether you are looking to get a mortgage loan, grow your small business, or for any other personal matter, you might ask yourself; should you inquire about lending money through traditional financial institutions such as banks or find out how alternative lenders operate?
This article will guide you through the following:
- Everything you need to know about alternative lenders.
- The differences between alternative lenders and traditional banks.
- The pros and cons of each.
Who Are Alternative Lenders?
Alternative lenders are individuals or companies that lend money to those who chose or are unable to get a loan from a bank. They can use their capital to finance investments such as real estate or working capital for small businesses who lack collateral otherwise.
Alternative lenders operate faster than traditional banks, as their approval process is comparatively informal. They could also provide loans to those who might have insufficient credit history or weaker scores. Which otherwise wouldn’t help with their personal loan applications if they applied to traditional banks.
How Do Alternative Lenders or Alternative Lending Companies Work?
Alternative lenders can come in two forms: individuals or alternative lending companies, such as Poss Capital. Although receiving a loan from an alternative lender is much easier, alternative lending companies do charge a higher rate as compared to traditional banks as they profit off the interest rates of the money they lend you; that is their business model.
At the same time, an alternative lender can offer you the quickest solution to your loan needs and provide you with funding based on clearly defined lending criteria. As they work with alternative funds, they offer a process without much of the hassle expected from applications made to institutions. Nonetheless, as nothing too rapid and without a thorough credit check comes without a price. Lending from them confines you to be much more on point with getting your payment instalments repaid in time.
If you want a loan, you will find that you can work with online lenders who operate entirely through the internet. This can work better, especially for those who don’t want to physically go and spend time gathering and providing documents to a financial institution to receive the loan they are looking for. Poss offers you access to Quik with fast, flexible loans with your choice of tenure and no early repayment fees. Try out our loan calculator, fill out your application and submit it online in less than 10 minutes.
But What About Traditional Banks?
Traditional banks operate differently than alternative lending companies do when it comes to lending money. They put their applicants through a much more meticulous assessment process to see if they are suitable to receive a loan. Consequently, for those who don’t have a long-standing and good relationship with a traditional bank, obtaining any loan becomes more challenging than it is with an alternative lender.
Key Differences Between Alternative Lenders and Traditional Banks
Alternative loans, small business loans, or real estate loans; whichever the reason for applying for a loan, there are some critical differences between getting money lent by an alternative lender and a traditional bank. These can be listed as
- Interest rates.
- Loan tenure.
- Processing time.
- The maximum amount for the loan you receive.
- Processing fee.
- Criteria for eligibility.
It is important to know what you’re paying for when taking up a loan. Transparent payment schedules and interest charts allows you to do just that when reviewing your loan offer from Poss Capital. Additionally, there are no prepayment penalties so use what you need and pay for just that.
Why Does An Alternative Lender Lend Money?
Alternative lenders provide loans for various reasons as they see fit for their investment. At Poss Capital, we understand that small and medium-sized enterprises face major challenges with limited access to finance across different stages of a business cycle. Poss wants to bridge the financing gap for businesses that do not have access or lack sufficient funding by providing them an alternative source of capital.
Pros and Cons of Working with Alternative Lenders to Get a Loan
Pros of Working with Alternative Lenders
- You will get a response much quicker than a traditional bank.
- Much fewer requirements and a shorter assessment for eligibility.
- Customized loans specifically tailored to your loan needs.
- Easier and faster approval, even with a lousier credit history
Cons of Applying for a Loan from Alternative Lenders
- Shorter loan tenures than traditional banks.
- Higher interest rates than traditional banks.
- Tighter budgets and consequently smaller loans to receive.
Seize Growth Opportunities Without Stress
Getting a much-needed loan from an alternative lender can be much more flexible than the process you will go through to apply for a loan from a traditional bank. Receiving your loan through alternative lenders could provide you with a much smoother path to doing things.