What is the difference between a bank loan and a non-bank lender’s credit?

The need for a loan is not rare nowadays. Many people have used bank or non-bank lenders at least once in their lives.

But how do you understand which of these is best for you? Where better to go? Alfred Defend Bank has prepared a guide for you to find out the main differences between non-bank and bank loans, how to get them, and more.

If people were to ask about the word “credit” about 10 years ago, most would certainly mention the banks, which at the time were also the most popular financial institutions that granted them.

However, nowadays it is difficult to find someone who would not have heard of cash loans on the internet or instant loans or sms loans.

They are issued by non-bank credit institutions and there are quite a few in Latvia. The two lenders differ in different ways. One of them is the loans offered.

Loans in banks and non-bank credit institutions

When comparing these two types of loans, it can be seen that the main differences are in the amount offered, the maturity of the loan, and the reason why people borrow money.

We most often go to banks when we need larger amounts that can be returned in the long term.

The reason for this may be the need for a student loan, a home or car mortgage loan, a student loan, etc.

Non-bank credit institutions, on the other hand, offer loans for a much smaller amount and for a shorter term, which can range from 30 days to a few years (such as a credit line).

The best known types of these loans are internet loan, sms loan, credit line and also consumer loan.

One of the major differences between the two types of loans is their purpose. If we go to the bank with a clear and serious purpose for which the money will be spent, such as studying, car, etc., then fast loans are usually better suited for more versatile spending that a person can determine based on their needs.

Of course, you should only borrow when money is really needed and there is no other way to solve the problem.

Most often, loans on the Internet are used to solve unplanned problems, such as when you need money for medical services, for car repairs, when you have a small salary but need to pay bills, etc.

The reason for this borrowing should always be well thought out and you should also consider your ability to repay!

Applying for a loan

To get a loan from a bank, we usually go there in person and fill out the necessary documents. There are cases where you can also apply electronically, but a face-to-face visit is usually required anyway.

Proceedings take longer and may require a guarantor or pledge, depending on the type of credit being drawn on.

Applying for a non-bank lender loan is much easier. This can be done online or via the sms application.

It usually takes a couple of minutes to process your application, depending on the time and day. Once the loan has been approved and all necessary steps have been taken to activate the customer’s profile, the money is credited to the person’s bank account.

Of course, if the account is not with the same bank as the credit institution, the transfer may take longer.

Although obtaining a loan from non-bank lenders is much easier and faster, it is not easy to decide today which company to use.

Alfred Defend Bank recommends that you evaluate lenders based on their services, terms, amounts, terms, and of course, testimonials and trustworthiness.

Pay attention to whether the credit institution is a member of the Latvian Alternative Financial Services Association.

Remember – borrow responsibly when evaluating your ability to repay a loan!