Alternative to Bank Loans
Most of us have experienced a situation where we need to fulfill a financial need quickly, and are not sure about the avenues available to us. While Banks are the most common choice to obtain an unsecured loan, Moneylender has become increasingly a viable avenue that complement the bank’s offering. In this article, we would like to provide you with information on how Banks and Licensed Moneylenders complement each other, and gives you the salient points when considering which lender might fits your needs better.
Speed of Service
Bank requires more time to process a loan, especially since they are more stringent in assessing the credit profile of the borrower. While many banks increasingly provides personal loan with shorter waiting time, a borrower will be able to get the same loan approved below one hour through a moneylender. Because a bank also provides many other services, you might encounter a long queue, thus delaying the process even further.
Size of Loan
Because of the stringent process, bank are often able to loan a bigger amount. A moneylender will be more conservative in loan quantum to customer. As such money lender is perfect for smaller size of loan that customer needs just to tide over an emergency event.
Interest Rates
Bank tends to provide better interest rate for the loan compared to moneylenders. The reasons include:
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Funding costs differential. Bank uses deposits whilst moneylender uses private funds to lend. This explains how funding cost differs between the two lenders; Bank and Moneylender.
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Credit Quality. Bank has lower risk appetite and demands a higher credit quality of borrowers. Moneylender tends to assume higher credit risks of borrowers and may even lend to borrowers no credit profile.
It is noteworthy that the maximum interest rate by moneylenders are 4% per month.
Approval
Banks assess a loan base on the individual’s credit profile, thus a borrower with weak credit profile are unlikely to have the bank loan approved. Moneylenders tend to be more tolerant when assessing the credit profile of each borrower.
In summary, depending on the financial needs and time urgency in meeting it, taking an unsecured loan from a bank should always be the first choice. Nevertheless, one always have the next best alternative to the moneylenders when bank rejected his loan. For small loan where time is of the essence, moneylenders could be the best of choice.
Feel free to contact us to understand more about our services. You may want to talk to our loan consultant for further information.