Online or In Person: Whats the Better Way to Get a Loan? – Nasdaq

Posted: January 5, 2020 at 5:42 am


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If youre looking for a personal loan, your options are increasing. Theres the traditional route visit a loan officer at your bank or the more modern option of an online lender that can get you a loan virtually overnight, if you qualify.

Financial technology companies that offer personal loans online are encroaching on banks in the lending business. Fintechs originated almost half (49.4%) of unsecured loans in March 2019, up from 22.4% in March 2015, according to a recent study by credit bureau Experian.

While some large national banks dont offer personal loans, others are responding to the competition with online offerings of their own. PNC Bank, one of the largest banks in the U.S., launched online personal loans this year to capture customers it couldnt serve at brick-and-mortar locations, says senior vice president for personal lending Chris Dervan.

Like many industries, theres been a big trend toward digital, and that trend will continue, he says. But part of what were seeing is that theres still a substantial customer base who likes that personal touch.

The heightened competition means consumers can handpick where they get a personal loan, be it online or at a bank branch. Here are four questions to ask when choosing between a bank loan and an online loan.

One of the obvious differences between bank and online lenders is the face-to-face exchange you can have at a physical bank.

If you value personal interaction and the security of knowing who is handling your loan, a bank might be for you, says Eric Simonson, a Minneapolis-based certified financial planner and owner of Abundo Wealth.

Some people like to just know that theres a person that makes sure the loan goes through smoothly for them, he says.

Also, you may have the opportunity to negotiate a lower rate or qualify with a lower credit score if youre talking to a person you already have a relationship with at a bank, Simonson says.

But the personal touch might come at a premium, says Oklahoma-based CFP Kyle Jackson. He says brick-and-mortar banks tend to pass on to the consumer operational costs that online lenders dont have, which can result in higher rates or fees.

If you need a loan quickly, online might be the way to go.

Online lenders and traditional banks with an online option can sometimes process an application and make a decision more quickly than banks that dont have an internet presence, Jackson says.

Some of those lenders can fund the loan the same day you apply, or the following business day.

Lenders with an online presence can also expedite your research process if they post their rates, says Todd Nelson, senior vice president with LightStream, the online lending arm of SunTrust Bank.

If youve got good credit, you dont really worry whether youre going to get approved, he says. What youre more concerned with is Am I going to waste my time with applying for a loan and getting back an offer I dont want?

For an online loan application, youll need to electronically share information like your Social Security number, education history and bank account information, which might require granting the lender access.

Especially in those cases, beware of scammers. Wisconsin-based CFP Ben Smith with Cove Financial Planning says that if you dont feel confident that you can tell whether an online lender is legitimate, the safest option would be a physical bank.

Managing a loan online, which typically means your only contact with the lender is via a customer service representative, can prove challenging for folks who arent financially or technologically savvy, Jackson says. If this is you, the online-only experience may not be a good fit.

The chief considerations when shopping for a loan should be its rate, fees and terms, Nelson says, rather than whether its from an online lender or a bank branch.

Some online lenders let you pre-qualify and see your potential rate, which is helpful information to have as you shop around.

Simonson notes that if you have less-than-desirable credit or are seeking a loan for a nontraditional reason, a community bank or credit union might be more willing to take on the risk of lending to you than a big bank or online lender would be.

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Annie Millerbernd is a writer at NerdWallet. Email: amillerbernd@nerdwallet.com.

The article Online or In Person: Whats the Better Way to Get a Loan? originally appeared on NerdWallet.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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Online or In Person: Whats the Better Way to Get a Loan? - Nasdaq

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