Borrowers can use two approaches to get a loan. One is the normal or traditional approach where you walk into a financial institution, discuss with their representative the product you want to use, and apply for a specific loan. The other approach is online loan service providers, which are increasingly becoming popular in day-to-day life. In this online approach, you look for loan products on your computer or mobile phone, find out the authenticity and trustworthiness of the lending firms, compare loan terms with other loan vendors and then make the right choice of which lender and loan to take. You also need to equip yourself with information about about loan companies and loan agreements.
How normal/offline loans work
Once the need for a loan arises, you will need to approach a financial institution or a bank. Typically, you will be given a representative to serve you, who will explain to you details about the features of the loan and the process involved in the application. You can use this chance to ask any question you may have and clarify your doubt. You will fill forms and attach copies of required documents for identification purposes and submit them. The lender will then go through your application, and if you have submitted all required documents, they will accept your application. In case of any missing documents, you will have to procure and submit the hard copies.
Once you give all the essential documents and filled in the information required, they will scrutinize your application. If you meet their qualifications, your loans will be approved and disbursed to your account. This process takes time based on the documentation needed, loan processing time, and lender scrutiny.
How online loans work
Advanced technology has made digitization a norm in developing and developed countries, and this revolution enrooted into the consumer lending industry. You can browse all available loans at the comfort of your zone. You can compare several lenders, features of their loans, and select the best that suits your needs. You will then create an account with the lending firm and upload all the required documents for your loan application. You will save time in submission since you are required to submit soft copies instead of hard copies that will consume time to print and submit in person or send via courier. Once your documents are verified and approved, your loan is disbursed into your account within the shortest time possible.
Differences between normal and online loans
- Processing Time
Once you upload the required documents and are established eligible in online loans, the loan is approved and disbursed immediately. Nowadays, online lenders use advanced technology to speed up the process and make it customer-friendly.
By contrast, in normal loans, physical inspection of documents is tedious and time consuming. A lot of paperwork is involved, and it consumes more time to process the loan than in online loans.
You can access online loans anywhere all the time as long as you have a laptop or smartphone and internet connection. These products are available, and you can check different loan products and compare their feature at any time on your smartphone. All you need is just to download the application, and you will be good to go.
On the other hand, you need to visit a financial institution or a bank in person for normal loans. You may need to fix a time with the branch representative to visit them during working hours. At times emergencies may arise off-hours or during bank holidays; if this happens, it may not be possible to access normal loans.
- Know Your Customer (KYC) documentation
KYC is a compulsory part of any lending financial institution. For online loans, KYC documents are uploaded to the lender’s portal account. They will verify the documents, and if satisfied, they approve your loan immediately.
For a normal loan, you will need to submit hard copies of each document physically. The lender will scrutinize each document to check its legitimacy. It takes time to process because of the heavy paperwork involved.
- Charges Involved
The charges and loan terms are displayed particularly on the lender’s website, and no hidden information of the cost involved in loan processing.
For normal loans, you may be required to pay commission to an agent. The lending institution requires any form of authentication on stamp paper, and you may get this done at your expense.
Internet penetration is growing exponentially. Several working professionals are finding it easy to fund their dreams using online loans. Features like easy accessibility and instant approval have made online loan products popular among youths. Online loans have made it easier to access money when your bank account has dried up.