20% of people applying for mortgages are being denied by big banks according to the statistics. Only a record-low 14.8% of small business loan requests were approved by the bank in October, 2012.
Due to this scenario, people are looking for other ways to borrow money or apply for a car loan or mortgage.
Some are turning into alternative lenders.
Alternative lenders: are they safe?
What is alternative lending?
Alternative lending is a type of loan available to consumers which is outside the traditional bank loan. A lot of people might not be aware of this if they are only focused on those big bank lenders.
Alternative lenders like money lender cash mart are more flexible than banks when it comes to loan payment and approval – which means you can pay based on your agreement as long as it’s valid and you can get approved right away as long as you have a good credit standing compared to the traditional process.
Even if it comes from the word “alternative”, this industry is a well-established industry being run by members of the financial services in one’s community.
Like any other loan type, you might want to check first the things you have to consider before you choose an alternative lender instead of the bank.
- Alternative lenders charge higher interest rates than banks most of the time
- You may only be able to get a large amount of loan
- Alternative lenders may go out of business too soon
- There will be no discount if you repay your loan early
- Some alternative lenders may charge hidden fees
Alternative lenders charge higher interest rates than banks most of the time
If you opted in to work with an alternative lender, there is a high chance that you’ll get higher interest rates compared to working with a bank with your loan.
Also, the risk of getting in financial trouble due to not paying monthly installments on time could be one big problem on your end.
You may only be able to get a large amount of loan
Like traditional banks, some alternative lenders are only releasing large amounts of loans and not smaller ones. There are alternative lenders who require loans to be at least $50,000, or even more.
For those who are planning to start a small business, it’s a hilarious amount of money and some of them don’t pursue getting it. Instead, they find an alternative lender that can release a smaller amount because no one wants to pay that large sum of money and be in debt.
In order to enjoy the option of getting money from alternative lenders, put it into consideration that you have to do research before jumping right in.
Alternative lenders may go out of business too soon
Since alternative lenders are new in space, there’s a higher chance of them going out of business too soon. It is highly recommended to check the alternative lender’s background and status before you apply for a loan.
No one’s gonna be sure of what’s going to happen tomorrow. Little did you know, when you wake up one morning, you’ll see that alternative lenders close down their business and you cannot do something about it.
You can check these information when you are doing the background check:
- Are they well-funded?
- Do they have back up from legitimate banks or another source of funds?
- How many years are they in business operations?
- What are the customer reviews for their service?
- Is there someone you can ask for reliable support?
There will be no discount if you repay your loan early
Unlike with bank lenders, there will be no discount if you repay your loan early with the alternative lenders.
Even if you pay the amount in full earlier than what is on the contract, they cannot give you any discounts. That is why it is important that you can ask the lender whether there will be penalties and extra fees not yet discussed.
Some alternative lenders may charge hidden fees
It will not come as clean as your new nails, and most of the time, they are really not mentioning those charges unless you ask them what it is because you saw it on your billing statement.
Looking to apply a loan for an alternative lender might be a little tricky and tiresome but once you nail down those things you have to consider, you will be able to connect with someone whom you can afford or someone that fits your needs.