Shaking hands on an online loan.

Getting A Loan Without A Traditional Bank

If you need a loan but lack the credit to get one through a traditional lender, you still may have an option. Take a few minutes and learn a bit about non traditional lending and what it may be able to do for your finances.

It used to be that if you needed a loan, your only option was a brick and mortar lender. Those days are long gone and the big conventional banks no longer have a monopoly on lending.

This is a good thing for the millions of people left out of traditional banking because of poor credit scores. Credit scoring is a system that is not always fair and that some will even say is racially biased. For example, why should someone be denied a loan simply because of a lack of credit history. Does not the absence of bad credit prove that someone is worthy of a loan. Why should someone have to get in debt to prove that they can handle debt?

If this has been your situation in the past, you should look into online lending. But first, let’s take a look at the pros and cons.

Online Lending

Online lending can come in a number of forms. It can be on a large platform, small platform, peer to peer lending, etc, etc. In most cases however, it is extremely streamlined. Online applications, fast approval and there is usually no requirement for wet signatures. It can usually all be done online, digitally.

All that being said, take a look at the pros.


Speedy And Convenient

The digital nature of online lending makes these loans very convenient and very fast. The entire transaction will be completed online and processing is lightning fast. Once approved for a loan, funding is just as fast. In most cases, funds can be deposited into your checking account as soon as the next business day.

More Accessible

Traditional lending locks a lot of consumers out. They depend heavily on credit scores and require borrowers to fit into a certain mold. Online lending is much more inclusive. It allows those without a lengthy credit profile to secure funding and it can even help those with bad credit obtain a loan.

Diverse Lending Products

Need something different than a standard installment loan? Many online lenders may be able to offer you a variety of different products to suit your needs. This could also include short term low dollar loans and even lines of credit.


Considerably Higher Interest Rates

Online lenders have higher interest rate offerings. There is no way around that because it is a higher risk industry. Most borrowers have no credit history to track of have made mistakes in the past. That makes them a higher risk. Traditional lenders can often offer single digit interest rates, but the requirement to get those rates is a high credit score.

Scam Potential

While you may recognize the names of the big national lenders, online lenders are less recognizable. This can make it easier to fall victim to a scam. Borrowers need to research companies before submitting their information and should read loan contracts thoroughly before signing.

Who Can Benefit From Online Lending

Let’s take a look at a few hypothetical situations where you might benefit from online lending instead of using a national lender.

You Need Money Fast

Let’s say that you are someone with good credit but you need money in a hurry. You might need equipment for work, money for healthcare or perhaps cash to fix your only vehicle. That national bank could take days to process your application, while an online lender may be able to get you approved immediately and send you money as soon as the next day.

You Have A Great Idea

What if you are someone who needs money to fund a start up venture. That big national bank might not be ready to fund your idea, but an online pier to pier lending group might.

You’ve Got Bad Credit

With bad credit, national banks are usually not an option. Even those with bad credit need help from time to time however. An online lender may be able to fund a loan for you that you can use to buy a car, plan a wedding or pay for an emergency home repair.

Posted by

James Car is a finance, loan and budget expert based in the United States. After attending Brookhaven college, he went on to become a successful entrepreneur. He now enjoys writing articles that help people save and make the most of their money.