There are both advantages and disadvantages associated with getting a loan from a bank that you should know about. If you are currently looking for a loan, this is an option that you should at least take a look at before making a decision. You need to know what all of your borrowing options are so you can select one that will match your needs perfectly.
PRO: Reliability
Banks in the UK are held to high standards and are heavily regulated, so you can trust them completely. You won’t have to worry about whether or not the bank you are borrowing from is reputable. This can save you a little bit of time doing research.
PRO: Good deals for some people
If you have a high credit score, you will most likely be able to get a loan with a fairly low interest rate, which can make it much easier to pay off.
PRO: Flexibility
A lot of banks are willing to give borrowers what are called “repayment holidays”, which is when you only pay interest on your loan for a certain amount of time. This can be very helpful if you are struggling to make your payments for whatever reason.
CON: Difficulty Getting Approved
Many people who try to get a personal loan through a bank end up getting rejected because of their low credit scores. Most banks are very strict about who they will give a loan to based on their credit history. If you don’t have very good credit, you will probably have a hard time getting approved by a bank. This is why so many people are getting loans with private lenders.
CON: Usage Restrictions
Some banks will only allow you to borrow money for certain purposes, whereas private lenders will let you use the money you receive however you want. There are actually quite a few different things that you won’t be able to borrow money from if you go through a bank. This can make it quite limiting for a lot of people.
CON: Takes a While to Get Your Money
It can take up to three weeks for you to receive your funds from a bank even after you have already been approved. Banks are notorious for taking a very long time to disperse funds to approved people. If you need money right away for some reason, a bank is probably the last place you want to apply for a loan with. The amount of time it will take for you to get your money will depend on a number of factors, but it’s usually not quick. Borrowing from a private lender can provide you with funds within a matter of hours.
CON: Early Repayment Fees
You may have to pay an additional fee if you pay your loan back early. This is not always the case, but it can be. The last thing you want is to be charged extra for paying back your loan before the due date. The average private lender won’t charge you for this, and it can help you save a lot of money. The earlier you pay back your loan, the less you are going to pay overall.
The Application Process
Applying for a loan through a bank can be a somewhat cumbersome process. You might have to fill out physical paperwork, depending on the bank you go through. A lot of banks will allow you to apply online, but it can take a while. Private lenders are mostly based online and make the application process very simple and easy. If you are going to apply for a loan through a bank, you should be prepared to set aside at least 30 minutes of your time. Some bank loans are very extensive and incredibly time consuming.
Interest Rates
Banks can charge very high interest rates, depending on what your credit is like. It can also be a variable rate, which means that it can change over time according to market conditions. This could result in paying more than you have to for your loan. A fixed interest rate is almost always a better option, as it stays the same for the duration of the loan you take out.
Should I get a Loan from a Bank?
Pretty much the only time that it is a good idea to get a personal loan from a bank is if you have really good credit. If your credit is substandard, you should think about applying with a private lender. Online private lenders tend to be far more flexible and reasonable with their terms. There is also a much better chance of getting approved with a private lender if you have a low credit score. Keep all of these things in mind before filling out any loan applications.