We all know that 2020 was a horrible year for most of us; with the pandemic causing all kinds of issues from health to financial, most of us are starting 2021 in the red. Still, there are bills to be paid, and if you are an employer, employees to be paid. Loan applications have been filled out at an alarming rate, thanks to all of this, and thankfully the SBA (Small Business Administration) has made it possible for most employees to stay afloat. But what about the average person? Where do they turn for help? Bank loans are one avenue, but alternative credit loans might be a better option for most.
So what exactly are alternative credit loans? In short, they are loans that originate outside of big banks. There are several reasons why someone might opt to apply for an alternative loan versus one through a big bank, and in all honesty, those reasons are very appealing. Less paperwork, faster approval, and quicker access to funds are just some of those reasons.
I would wager to say that just about everyone is familiar with alternative credit loans, and they don’t even realize it. If you have ever heard of or used Quicken Loans, Kabbage, or even PayPal Business Loans, then you have heard of or used alternative credit loans. These loans, however, are not to be confused with payday loans. These types of loans are more in line with installment loans, which come with a payoff plan that spans several months or years, depending on the size of the loan.
The key to taking out a loan, whether through big banking or alternative credit loans, is making sure that you have the ability to pay them back. Given the conditions that 2020 has left most of our finances in, the appeal of taking out a loan to get back on our feet is high. However, I would encourage anyone looking to take out a loan, either for personal or small business reasons, to be sure that they are able to pay back that loan in a means consistent with the agreement. Not being able to do so, will just end up making things worse in the long run.
If you are a self-employed small business owner, you may have been turned down time and again at big banks, when trying to obtain a loan to get your business going. This is going to be pretty standard with big banks because you are viewed as high-risk because you don’t really have anything to show. However, with alternative credit loans, the approval process is much less strict, the downside being that it also comes with a higher interest rate.
However, with that alternative loan, you have the ability to build your business, and its credit profile so that you can refinance with a bigger bank, and lower your interest rate. Regardless of which route you go, there will be pros and cons; Before you sign any paperwork, you need to sit down and weighs the pros and cons and determine which is best for you at that moment, because things can and will be changed down the line.