Saving Money by Getting Personal Finance from Personal Loans Lenders

Couple in real-estate agency signing property loan contractDirect lenders are often viewed as the banks of the future. Certainly, peer to peer lending has become more and more popular, especially since the Internet allows people from all corners of the world to connect with each other – and, given the huge number of options available, it’s almost certain that each borrower will find a lender to suit their specific needs.

Peer to peer lending has several advantages compared to a traditional loan from a bank: the credit checks are more relaxed, and sometimes you may qualify even with a credit score far below the one considered acceptable by the mainstream banks. There is little paperwork and red tape involved, you get quick access to the money, and, the most important aspect of them all: the loan is usually cheaper than any other on the market. This is simply because the profit for the lender is still higher than what can be obtained by investing in other financial vehicles, so everybody gains from this type of transaction: the lender gets more at the end of the day than from a bank deposit or stock trade, and the borrower has to pay less than the bank rate.

The Advantages of Disintermediation

For borrowers, the most attractive feature of personal loan lenders is the low interest rate. This is the direct result of what is know in the industry as disintermediation – basically, there is no middleman involved in the lending process, no bank or credit union or other similar organization, which has employees to pay, headquarters to maintain, procedures to follow, and so on. In case of peer to peer lending, people who have extra money and want to invest it are connected directly with people who need to take a loan, and that’s it. This is a huge money saver, which is reflected in the total cost of the loan.

It’s important however to understand that this advantage is slowly fading away, as personal loans lenders become the victims of their own success. Since they attracted a considerable share of the lending market in the past years, online platforms have now drawn the attention of the big investors, who want a share of the profit, and they’ve started putting in money as well. Of course, they have their own rules to follow, and therefore they have to stick to higher rates. In addition, governments from all over the world have started to take a closer look at this process, and have imposed additional rules and regulations that often translate in higher taxes. Last but not least, top bad credit lenders have already seen a fair share of default cases – a situation worsened by the economic crises in the recent years, and therefore they have to increase the interest rate in order to protect themselves against similar risks in the future.

For the time being, however, the interest rates provided by the personal lenders are still among the best you can hope to obtain as a borrower. There are very few – if any – transaction fees and commissions, the procedure is simple and straightforward, and, as long as you are able to repay the loan on time, without delays, you know exactly how much it will cost you, from the very beginning.