Bank Loans vs. Private Lender Loans: A Comparison
- Credit Score
- Loan Options
- Loan Terms
- Monthly Payments
- Documentation Requirements
- Approval Process
If you want to have a car, you can search for the best auto loan in the Philippines. If you plan to start a business or purchase a house, there are loans for those as well. Borrowers have varying loan options. However, many are having difficulty deciding between bank loans vs private lender loans.
It’s crucial to understand the differences between the two in order to learn which one can best cater to your needs. Continue reading to learn more about these.
What Are Bank Loans?
Bank loans are any amount of money borrowed for a set period from a bank. Banks are in the business of taking funds from depositors. They pay the depositors and lend money to borrowers with interest rates and generate profits through the liquidation of payments and interests.
Bank loans are subject to strict laws, as well as programs set forth by the government. These regulations often dictate what bank loans can be offered to borrowers and how to lend them.
What Are Private Lender Loans?
A private lender loan refers to money given to borrowers through the funding of investors and any other private organizations. These are mortgage-based. Traditionally, banks have dominated the mortgage market. But increasingly, borrowers are finding it much more efficient to finance purchases using private lender loans.
Despite being still subject to laws, private lender loans are significantly less regulated. This is why they can be more flexible in the types of loans offered, less stringent when it comes to requirements, and are more forgiving with credit scores.
When it comes to dealing with loans, securing bank loans usually require numerous documents to be submitted by borrowers. The banks will check your assets, business, and other loans. To add to that, they would also look at your credit score. All these help the bank assess whether you have the diligence to pay on time.
The reason why private lender loans hold the advantage is that they are flexible when it comes to poor credit scores. The reason for this is mainly due to the fact that they generate revenue through loans. One can say it is a give and take situation. Without people securing loans, their business cannot thrive.
Private lenders look beyond credit scores and value collaterals more. This is what enables them to offer varied loan options. For instance, funding a car is possible even with a poor credit score or no credit history at all — as long as you have an asset for collateral.
While it’s true that private lenders still check your financial history, they will be more forgiving knowing you have a valuable asset.
Given that there are fewer government regulations for approvals, private lender loans hold leverage over banks when it comes to providing loan options. As a borrower, you would greatly benefit from the provided customized loan recommendations that help match your financial goals.
It’s also worth noting that securing private lender loans are more accommodating to client needs.
Private lenders pride themselves on going the extra mile by carving out solutions to secure your loan, whether it’s a concern regarding limited credit history or the desire to limit closing costs or low down payment.
Moreover, they offer efficient transaction methods. For example, at Asialink, we offer you the opportunity to secure a car loan, truck loan, PUV/PUJ loan, tricycle loan, and 2nd-hand vehicle loan, all through a simple online application.
Bank loans typically have longer terms compared to private lender loans. However, private lender loans are more flexible. This is especially true when it comes to the amount of money being loaned.
A highly valuable asset can easily result in a bigger loan amount because private lenders understand they can recover from losses through collateral liquidation.
It’s true that the longer the loan term is, the easier it is to manage. It may, however, end up incurring more interest fees in the long run.
Many private lenders found success in business due to their flexibility of payments. As a borrower, you would be glad to know securing a private lender loan means gaining more understanding.
With regard to collecting monthly payments, private lenders would be more willing to adjust to a day earlier or later. When it comes to payments, bank loans are usually uncompromising.
Keep in mind that securing private lender loans is relatively more cost-efficient as well. Bank loans usually have low-interest rates to be repaid over the years. However, that heavily relies on the stricter lending criteria.
The slightly higher interest rates of private lender loans might be a better option for you compared to the principal plus interest rate policy and stringent approval process of bank loans.
As stated earlier, banks meticulously assess borrowers’ payment capacity. For this reason, they tend to require more documents along with the credit score.
On the other hand, private lender loans value your collaterals the most, which makes room for flexibility with documentation requirements. For example, you can secure a car loan at Asialink without hassle when you have the following:
- Completely filled out application form
- Official Receipt & Certificate of Registration (OR/CR)
- Proof of Income
- Latest Picture of Vehicle
- Proof of TIN
The major downside of bank loans is that they often come with stricter lending standards because they are subject to law compliance. They will thoroughly access your eligibility which can result in a longer approval process.
Alternatively, private lender loans can be approved faster.
For instance, here at Asialink, you can simply fill up an online application form and personnel will immediately contact you via email or contact number. When it comes to this type of loan, gaining clients is the main priority.
When it comes to choosing between bank loans vs private lender loans, both carry their own pros and cons.
If you prioritize low-interest rates and longer loan terms, bank loans may be a better option. However, private lender loans clearly hold numerous advantages for those with concerns regarding credit score, payment flexibility, documentation requirements, and approval processing.
The most important takeaway is that it will depend on your financial needs. At Asialink Finance Corporation, we would be more than happy to assist with your decisions. Get in touch with our team today!