The loan industry is basically split between two major competitors in Canada that are banks and private companies that give online loans. Now the difference and competition between the two arise due to the different features and benefits of loans provided by each of these giants in the industry. Your friends and family can not be there for you every time when you need money for emergencies so you are left with the option of taking a loan. Now research done by a few companies in 2018 showed that people are more inclined towards getting an online loan rather than a loan from a bank, though they did not mention the reason for this trend. We completed their research and compiled an article about online loans no credit check instant approval Canada here for you to refer to. The following is the actual comparison between banks and online companies and their features which gave them the advantage over bank loans.
Dependency on credit score
Banks give a lot of value to your credit score and form it as an ultimatum on the basis of which they reject thousands of loan applicants. The banks set their own limit for a credit score where you will certainly face rejection if your credit score is lower than the limit.
When you take a loan through a private company things are much more relaxed. These companies tie you up with private lenders who do not totally depend on your credit score to gain confidence in lending you money. These lenders can ignore a low credit score and can simply judge you on other points like your salary. This means that a lot of people who face rejection at banks can easily get a loan from a private firm. Statistically speaking, the rejection rate of private companies is drastically lower than that of banks.
The difference in Processing Speeds
The processing speed of banks for any type of work will always be slower if you compare it to a private firm. But when you compare the time a bank takes to process a loan request to that of an online company then it gives you quite a shock. Firstly the loan application form provided by a bank is itself very lengthy and can take up an hour to fill. You have to arrange various documents that they require. Once you’re done with that tedious work, the application takes a whopping 2 weeks to be processed and sent to your bank account. This kind of waiting can make anyone run out of patience.
The process for an online loan is a lot quicker and almost amusing when compared to a bank loan. The application form is brief and to the point. It would take you mostly 5 minutes to fill it properly. The processing speed of the online application is so quick that in the next couple of minutes the request is processed and you are linked up with the lender who can easily send you the money within the next 24 hours.
The Difference in Interest Rates
Bank loans started with a practice that received a lot of backlash from a lot of borrowers but they did nothing to change it. The banks started charging a higher interest rate to customers who held a low-interest rate and vice versa. They used to already reject people with interest rates lower than a certain figure but now even the people who cleared the bar had to face discrimination by paying a higher interest fee on their loans.
Private companies never believed in discrimination and promoted the fair treatment of all customers. They never changed the interest rates for anyone and simply kept on providing financial help for their customers.
Scrutiny on Reasoning
You always have to provide a reason for applying for a loan no matter where you go. However there’s a difference in the reasons that are accepted in different places. Banks scrutinize a lot on the reason you list for the loan. They do a background check and make sure that the reason is legitimate. They also do not give a loan for a reason that they think is not too important and simply reject the application.
Online loans are much more flexible in this aspect. You can list any reason you want to and the company will forward it to the lender who usually accepts it. There is no scrutiny done as they believe that the loaned money is your money and you can use it in any form you want.
The Difference in the Lower Limits
There is actually a lower limit to the loan amount you specify in your application. Every bank has a different lower limit but these limits are usually so high that you mostly end up borrowing more than you actually need to. Any amount lower than what is profitable to the bank is immediately rejected.
Borrowing more than you require only adds to the already mounting pressure of a financial crunch that you might be facing. Borrowing more than you require would mean you are paying interest on money that you never needed to borrow in the first place. Private firms took a bold step and reduced their lower limit to $100 for people who don’t need much to get out of a tight spot.
The Difference in Mortgage Policies
Banks follow the old and orthodox method of mortgaging belongings like property or a car to lend you money. The modern era looks down on such practice but banks have remained stuck to this policy.
If you ever apply to a private firm for a loan then you don’t need to provide anything for security. The companies provide you a loan without the need to mortgage anything that you own.
These drastic differences between bank loans and online loans in Canada are the reason why the majority of people prefer to take loans from online companies since they are simply much more borrower-friendly. They provide the best type of financial help and certainly have much better policies than orthodox institutions like banks.