The Advantages of Alternative Lenders
If you have bad credit, you may have been rejected by big banks or financial institutions when it comes to getting a loan. The good news is, alternative lenders could be the answer you’ve been looking for. This isn’t uncommon – since the GFC, banks have been much more wary about lending money to people with bad credit or those who don’t have a stable financial background. This can be really tough if you’re a small business looking for financing or if you have bad credit and need some help.
Firstly, it’s important to learn a bit about what alternative loans are and who is likely to offer them.
What is an alternative loan?
Alternative loans are generally offered by non-traditional lenders. Instead of banks and credit unions, you’re likely to deal with smaller alternative lenders who can offer you different types of small business or bad credit alternative loans. These could include:
- Private loans
- Bad credit loans
- Wholesale funds
- Start-up loans
It’s important to understand as much as possible about the bad credit alternative loan that you are interested in getting before you sign up to anything. Each loan will have individual terms and conditions and you need to make sure that you find the right option for you.
When it comes to getting a bad credit alternative loan you’ll want to consider factors such as:
- Loan amount
- Loan term
- Interest rate
The advantages of using an alternative lender
Get a second chance
Many people who discover alternative lenders have been rejected numerous times with loan applications to big banks, credit unions or lending institutions. One of the main advantages of using an alternative lender is that you can get a second chance at having the finance you need for yourself or your small business approved. If you have bad credit, this second chance could be exactly what you need to get back on a better financial path.
Quick and easy applications
Rather than a lengthy process with lots of questions and documents required from you, alternative loans are generally more straight forward to apply for. You’ll need to supply basic information (such as your key personal details) as well as financial data.
The alternative lender will review your financial situation to try to find the right bad credit alternative loan product for you.
Alternative lenders often operate solely online and some applications can take as little as 15 minutes from start to finish. This also means you don’t have to physically go to the bank and can make your application at any time, from anywhere.
Quick access to funds
As long as everything goes smoothly, you’ll often get your bad credit alternative lending approved in as little as a few hours. It’s important that you have all of your documents ready for your alternative lender to review, and can provide all the information required from them.
Once the bad credit alternative lending is approved, you may be able to access the funds within 24 hours. This is much quicker than most banks or credit unions could offer (generally it’s between 1-2 weeks) and means that you can go right ahead with using your loan for whatever is required.
Bad credit is less of an obstacle
Many banks will simply not lend money to people with bad credit. This can be incredibly frustrating – especially if you are trying to start up a small business or your bad credit rating is not your fault. Banks often have set criteria for who they will lend to and if your credit score falls below their fixed numbers, you can not borrow from them.
With alternative lenders, there are often fewer requirements and the criteria for loans is much more flexible. Alternative lenders are often more willing to review cases individually rather than simply saying no if you have a poor credit rating. This means you are much more likely to get a loan with bad credit than if you approach a traditional lender such as one of the big banks.
Flexibility with use of funds
Many traditional lenders will require information about what you plan to use the loan that you are taking out for. This is particularly true if you have bad credit and they are cautious about lending to you in the first place. With many banks, you’ll be required to give a specific plan detailing how the loan will be used.
With alternative lenders, you have a lot more flexibility in terms of how you use the funds that you are given. It’s always important to use the funds appropriately and sensibly – yet with bad credit alternative lending, you’ll enjoy not having set conditions on how you are expected to put the money to use.
Things to consider with an alternative lender
For many people with bad credit, alternative lenders can offer a solution that they simply didn’t think they’d ever find. The money can really make a difference to small business owners, start-up companies or people with bad credit who have been continually rejected when applying for loans from banks and traditional lenders.
It’s still important though to do as much research as possible to make sure that you find the right alternative lender for you.
- Check the interest rates being offered with bad credit alternative lending – often these can be much higher than standard interest rates. Although you should expect to pay a slightly higher rate of interest, you shouldn’t have to pay anything that you feel is way beyond average.
- Make sure you’re happy with the loan term and the loan amount – you want to make sure that you can pay back your alternative lender in the time that they have given for your bad credit alternative loan. If you default on the loan or are late making payments, you could damage your credit rating further so never stretch yourself too far financially.
Find a lender that you trust. You should feel comfortable asking as many questions as you need to. Look at online reviews and ratings to check that previous users have been happy with their services.
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