As the world becomes increasingly digitized, it's not surprising that online lending is becoming a preferred choice for consumers looking for an alternative to traditional consumer credit. Online lenders offer a fast and convenient way to borrow money, and with interest rates lower than those of credit cards, online loans are becoming an attractive option for many borrowers.
In this week's FinTech roundup, we take a closer look at the rise of online lending and explore how this innovative form of financial technology is changing the way people access credit.
The problem of high-interest rates and predatory lending practices
For many Americans, taking out a loan is the only way to cover unexpected expenses or make ends meet. But traditional loans can be hard to come by, and when they are available, they often come with high interest rates that can trap borrowers in a cycle of debt.
Now, there is an alternative to traditional consumer lending: online loans.
Online loans are a type of financial technology (FinTech) that allows borrowers to apply for and receive loans entirely online. Because they are powered by technology, online lenders can offer loans with lower interest rates and more flexible terms than traditional banks.
For borrowers, this can mean the difference between being able to afford their loan payments and being trapped in debt.
So, what are the benefits of online loans? Let's take a look.
Bullet point about the benefit of online loans
- More flexible terms: Online lenders typically offer more flexible loan terms than traditional banks. This means that borrowers can choose a repayment schedule that works for them, whether that's weekly, bi-weekly, or monthly.
- Lower interest rates: Interest rates on online loans are typically lower than those of traditional loans. This can save borrowers a significant amount of money over the life of their loan.
- No hidden fees: Online lenders are required by law to disclose all fees upfront. This means that there are no surprises when it comes time to repay your loan.
If you're considering taking out a loan, an online loan may be the best option for you. With more flexible terms and lower interest rates, online loans can help you save money and stay out of debt.
How do online loans compare to traditional consumer lending products like credit cards and personal loans from banks or credit unions?
Mirek Saunders, a financial expert from PaydayChampion discusses that for starters, online loans tend to have lower interest rates than traditional consumer lending products. This is because online lenders can offer more competitive rates by cutting out the middleman – the bank or credit union.
Another advantage of online loans is that they are often much easier to qualify for than traditional consumer loans. This is because online lenders use alternative methods of assessing risk, such as using data from your social media profile or your activity on other financial platforms. In addition, Payday Champion provides Bad Credit
lending services to those with a bad credit score.
Finally, online loans can be funded very quickly – sometimes in as little as 24 hours. This is a huge advantage if you need access to cash urgently.
So, if you’re looking for a more affordable and accessible way to borrow money, an online loan could be a great option.
Summarize the findings of recent studies on online loans
In recent years, online loans have become an increasingly popular alternative to traditional consumer credit products. A variety of factors have contributed to this trend, including the rise of online banking and the increasing availability of financial data.
According to a study by the Pew Charitable Trusts, 43 percent of Americans say they would consider taking out an online loan, up from 34 percent in 2015. The study also found that people who have used online loans tend to be younger and more likely than those who haven't to say they're "extremely" or "very" satisfied with the experience.
Meanwhile, a separate study by Experian found that the number of people taking out online loans increased by 50 percent between 2016 and 2017. And while most online borrowers say they're using the loans for emergency expenses, a significant minority are using them to consolidate debt or make large purchases.
So what's driving this trend? Aubrey Saffa Bender, a Content Editor and Writer at Payday Champion, answered that one key factor is that online loans tend to be more readily available than traditional consumer credit products. According to the Pew study, nearly half of Americans say they would have difficulty getting a traditional loan, compared to just 18 percent who say the same about an online loan.
Another factor is that online lenders like PaydayChampion
are often able to provide more competitive rates than traditional banks. This is because they can use technology to better assess risk and target their products to those most likely to repay.
Finally, the rise of online lending reflects a broader shift in the way people manage their finances. Thanks to the proliferation of financial data and mobile banking apps, people are now more comfortable than ever before managing their money online. This shift has made it easier for online lenders to reach borrowers and offer them competitive terms.
So if you're considering taking out a loan, an online lender may be worth considering as an alternative to a traditional bank. Just be sure to do your research and compare offers from multiple lenders before making a decision. -