The need for the debt has been with us for thousands of years. The process of borrowing and lending has, however, evolved over time, but the basic features remain the same. The oldest records about debt date from about 3000 years ago. Historical documents show that without credit facilities, civilization would not have advanced as far as it has.
In the past, anyone who wanted to borrow funds for a wedding, vacation, card debt, or to consolidate their debt had only two credit sources. One was to visit their bank or credit union and the other was to acquire an extra credit card. Banks have, over time, cut down on risky lending, making it hard for small businesses and consumers to access credit facilities.
The 80s saw the start of online lending and the computerized processing of loans. The new technology disrupted the old paperwork-heavy lending process, effectively shortening it. Soon, a borrower did not even need to step out of their homes to access credit.
The growth of alternative lending sources
Today, alternative lenders have profoundly influenced the lending landscape. They have developed customer-centric lending platforms that have attracted the traditional banks’ clientele by the droves.
These alternative sources of credit utilize digital technologies to gather data on risk. They then use this information to decide on lending. A Deloitte study showed that this market grew to $440 billion in 2015. By 2016, the market had reached the $560 billion mark. Statisticaldata shows that the sector’s value has now surpassed $243,079.6m. The industry is expected to achieve a 10.7% annual growth rate to $365,214.8m by 2023. Thecrowdlending arm of the alternative lending market is the most successful with a transaction value of US$180,790.0m.
This means that if you need credit, you do not have to pay too much to afford it. You also do not need to beg your bank or credit union for assistance. There are now more accessible, affordable ways to access credit besides the traditional personal loan. The ability to choose between different providers eliminates the chances of being stuck with a high interest charging kind of debt.
If you obtain credit with lower payment costs, you will then reduce your debt burden, whichwillhelp you to pay back that loan faster. Below are some of the best lending alternatives to the traditional personal advance.
Person-to-person loans
These are a type of personal advance but one that’s borrowed from other individuals. These could be family, friends, or strangers through online P2P platforms. These platforms are advantageous in that you do not need a stellar FICO score to access credit. You also do not need proof of a regular income.
Such lenders gauge your creditworthiness via other means. Your rental payment records or college degree might be all they need to ascertain your degree of creditworthiness. When applying for online P2P advances, you will need to fill out an application. Investors will go through the form and decide if they approve it. The process is not as fast as that of payday type loans, but it has lower interest charges.
When it comes to borrowing from family and friends, your financial records may not matter at all. Data shows that over 88 million Americans turn to people they know for credit each year. This group of lenders does not have a strict lending policy, and even they did, theirs would not beat the scrutiny of a bank.
Consequently, they will not review your FICO scores, and might not levy hefty interest charges. Theyoftengive very affordable advances. There are challenges to this process too. If you do not have clear lending conditions and terms, you might ruin your relationship. If you are going to borrow from your family or friends, ensure that all the terms are laid out in writing beforehand. Seek the assistance of an attorney, if possible.
Online installment loans
If you are one of those people who would rather walk on hot coals than borrow from family, you still have other credit alternatives. Online bad credit advances also work for anyone who might not have close family or friends to turn to for credit according to https://nation21loans.com. Online lenders give quick and convenient advances from the comfort of your home.
They also will not deny you credit if your FICO score is subpar. What they care more about is your ability to repay the debt. They will, therefore, check your employment records before approving your request for an advance. These credit sources are, however, short term, high interest advances.
You have to be careful during your application process. It is an industry riddled with predatory lenders whose only aim is to make a living off your predicament. Some of them lend cash at very high rates to ensure that you fail in your repayments. This will benefit them more since you will then have to pay higher penalties and interest for defaults.
Home equity lines of credit
If you have purchased a home, then you have considerable bargaining power when it comes to credit. You can borrow against the property. These debts are often low interest compared to a credit card or payday advances. You can also utilize the cash acquired for any emergency you may currently have. These loans are particularly useful for home renovations.
Their drawback is that since your debt is secured by your home, you run the risk of losing your house if you default. Losing a crucial investment such as a home can wipe out most of your savings or any advantages you may have gained from the credit line.
A personal line of credit
This source of credit works like a personal advance or credit card. The lender will approve your request for a credit limit. The interest charge and terms of the loan resemble that of a personal advance. You will, nonetheless, only pay interest on the amount you borrow. The approval criteria for this credit are like that of a personal advance. However, you will be charged an annual fee if your line has an outstanding balance.
Credit cards
Issued by credit unions and banks, the plastic card is a popular source of loans. At least 83% of Americans between 30 to 49 years of age have a card. They are very convenient and allow for easier spending than debit cards.
This is also their main disadvantage. The average American adult owes at least $4,293 in card debt. The nation’s credit card debt has surpassed the $1 trillion mark, as per Federal Reserve data. The interest charges on credit cards are also very high. Interest rates are around 17.41%which is up from 16.15% in 2018.
Credit cards are nevertheless flexible and easy to use and can earn you bonuses and rewards as well. You could, for example, earn cash backs or travel bonuses. If you have a less than stellar FICO score, it is easier to apply for a secured card. With it, you can rebuild your score and upgrade to better cards over time.
The final word
If your financial institution has denied you a personal loan do not despair. There is nothing unique about that because over two-thirds of US borrowers get denied their requests for individual advances. However, there are other friendly lenders out therewhowill back you up in an emergency.
