It may not be possible for every type of consumer to get loans – both short and long term loans, via traditional approaches. It is a glaring truth that not all of us would have the means and access to secure a loan from the prime credit market. Thus alternative financing routes are getting more and more vital in today’s fast business world.
Need for Alternative Finance Options
Most developed countries have a strict and vigilant system in providing a thorough background check before sanctioning a loan. While it makes business sense to do these checks, an alarming number of Americans would not satisfy the general criteria in securing these loans owing to the lack of credit history. They have no other go but to look for alternative modes of financing like Canadian installment loans and payday loans to get their ends meet.
Issues with Getting Traditional Loans
The prime credit market looks to serve largely a homogeneous group and often overlook the needs of others. The general American population has a mix of people who still are good enough for loans but do not have a credit history due to circumstances that they cannot help.
New immigrants and settlers in the USA or any country who have just arrived may not have had enough on their credit history. What about the young people who are just starting out often do not have a long credit history? Even a person with a good history but a sudden turn of event like a layoff can out a black mark on the credit history forever.
But the majority of these people deserve a credit or a loan, especially when they are capable of repaying them on the agreed terms. It is for these people and many other similar cases that usually try to avail short term installment loans online to kick start their dreams or just to meet their needs or debts.
Types of Alternative Financial Services
Understanding the needs of the fast changing world, the pay day lending companies that involve a multi-billion dollar business have slowly migrated to more flexible options like the installment loans and the line of credits.
Installment Loans
Installment lending is not a new business in any way. They hold a strong place in the history of finance and products like sewing machines have been sold primarily using this method.
With the changing times, the installment loans have changed too and now are available in the form of short and medium term loans that the borrower can get deposited directly into their bank account.
How do the Installment Loans Work?
The borrower submits the application online with all the necessary documents. The loan company goes through them and validates them. Depending on the complexity of the case, the loan sanction process can take from five minutes to a few days.
As soon as the loan is sanctioned, much like how the employers deposit the salary into the employees account, the borrowers account is credited with the amount.
Line of Credit
The credit system has been immensely popular especially with the huge surge in the usage of credit cards in the late 1980s. Though they have been in use since the 1920s, the end of the millennium made sure that they are omnipresent in every household.
How do the Lines of Credit Work?
A line of credit acts like a bank account that the borrower can borrow against any time, just like credit cards do.
It all starts with the borrower submitting an application online and a much similar validation of the application and the documents submitted is carried out by the lender company. Once the company approves the line of credit, the borrower will receive a limited credit amount that they can borrow against. Again the amount will be deposited in their bank account as agreed upon.
Advantages of Alternative Finance Sources
Both these short term alternative finance sources have gone through lots of iterations and the advent of the internet and the online processing have made them increasingly popular and accessible to everyone. Let us discuss quickly some of the advantages of the installment loans and line of credit system now:
1. They are more flexible and have much lenient eligibility criteria to qualify
The alternative finance loans are more flexible and accessible to subprime credit market that gives them a universal appeal. As discussed earlier, even people who would not normally be sanctioned the loans would have a chance to get a loan now.
2. They can be both medium and short term
While having the flexibility of the pay day loans, these short term installment loans have more longevity than them. They are repayable in shorter installments over a period of time, instead of a lump sum repayment.
3. The internet makes it hassle free
Thanks to the internet and online processing, the long queue and bundles of paperwork are done away. Within a stroke of few keys and a few clicks, the fund can be arranged to reach the loan taker.
4. Collateral free loans
The short term online loans not only have done away the need of long and strong credit history, they are mostly collateral free which makes it more accessible for the youth market and the new immigrants as well.
5. Choice of repayment options
Instead of having to pay a lump sum at a particular date, these alternative modes of credit offer a variety of repayment options to choose from. The borrower can pay a fixed amount periodically or can choose to pay partial payment when they have a windfall.
Conclusion
The pay day lending companies have come a long way to adjusting their business model to suit the needs of the customers and their lifestyle. They are currently offering different finance methods to different set of borrowers, unlike the yesteryear’s payday loan schemes.
The internet and the online processing have made the change smoother and made the financial world more accessible to people from various economic and financial background alike and works to address the gap.
