Over the past years, financial technology has made it possible for ordinary mid-income consumers to avail online of quick-to-process, hassle-free personal loans.The popularity of fintech to provide personal loans caused a significant decline in credit card purchases and bank-supported financing deals.
In fact personal loans have been instrumental in freeing many consumers from overwhelming credit card debts, as they were used in paying off a consolidation of high-interest credit card balances. As fintech revolutionized the financing and lending industry, it’s important for consumers to understand how fintech financing works differently from credit card facilities and traditional bank loans.
Consumers nowadays perceive online lending as a very simple, quick, and convenient way to obtain a loan that can be accessed within a week or two. Applying for a personal loan online reduces the application process even in minutes if looking to make a purchase.
Why Fintech Personal Loans are Better than Credit Card Purchases?
A study confirmed that fintech consumer loans impose lower interest rates, when compared to interest charges collected by credit card companies. Interest rates on personal loans are applied on a straight basis and imputed as part of monthly loan amortizations, which prevents the debt from ballooning into insurmountable amounts.
Fintech providers are making it their goal to improve middle-income consumers’ experience better when borrowing personal loans. This is particularly perfect for borrowers with good credit standing and have a FICO credit score of around 600 to 700 who sometimes face emergency situations that require instant money which they can manage to pay on time.
Although fintech loans are similar to borrowing from banks, there are differences on how fintechs address financial risk management and security.
What Makes Fintech Loans Different from Bank Loans?
Fintech were developed mainly to improve the delivery of financial services through automation. It employs specialized software and algorithms that work with smartphones and desktop computers in managing the financial processes.
Fintech changed consumer lending by focusing more on consumer-based services, particularly offering personal loans that do not need a human assistance in verifying an applicant’s credentials amd creditworthiness.
Key Differences between Fintechs and Banks
Fintechs target consumers who have low credit ratings, as well as those who do not maintain a bank account. Meanwhile, banks’ target only customers with strong credit ratings as well as proven legitimate track records.
Another difference between the two is that fintech companies have collateral requirements that are lenient and flexible, while bank rules are strict and usually unbending.
Fintechs encourage innovation , having an organizational structures that have less barriers against trends and innovations. Bank structure on the other hand, can be described as rigid as there are government limits on how much of the depositors money is available to lend to other bank customers who have been vetted as as potentially risk-free borrowers.
Readers who are currently looking to know where they can find the most highly recommended online lending entities, can check smartshopperusa where there’s a list of accredited fintech companies that offer personal loan borrowings online.