Online lending is a relatively recent development, with most of its growth happening within the last ten years or so. Many financial analysts believe online loans became especially popular after the recession of 2008. Why? Well, a report issued by the Federal Reserve Bank of Chicago states that, "Banks across the country dramatically tightened credit card standards during the first two years of the Great Recession." The recession affected everyone, some more than others. Lenders changed their practices, tightening their standards and giving out fewer loans - though people actually needed more money to offset the financial difficulties. Online loans are a form of alternative lending, so it's easy to see why they grew as a trend: They were easier to attain, and loans were in high demand.
This is still a popular reason why people turn to online loans today. However, there's a bit more to it than that. There's no doubt that the online loan industry is still growing, and here are just a few more reasons why:
1. They care about their customers.
Once upon a time, online lenders had a bit of a bad rap when it came to customer relationships. Why? Probably because the Internet was still new, so people naturally didn't trust anyone who solely operated via the world wide web. That's changed. Now, the average person is quite comfortable with the Internet, and it's actually facilitated a lot of economic growth thanks to the flexibility it offers. As it turns out, most online loan companies actually care a lot about their customers. They want to help solve financial problems, and they're genuinely interested in helping their customers with budgeting, investing and other concerns.
2. Online loans are fast.
When compared to even the quickest of bank loans, online loans are usually the fastest loan you can get. If you're applying for a loan, it's usually for a specific reason. Why would you wait when you can have the money in such a short amount of time? Because these alternative loans are processed online, there aren't any delays because of missing forms or incorrect information. A bank loan could be stalled because of an underwriter or additional processing - or numerous other reasons. Online loans typically don't have those problems.
3. Online loans are convenient.
There's simply nothing more convenient than the comfort of your own home. When customers apply for a conventional bank loan, they typically dress in their nicest clothes, only to sit in a bank office for over an hour filling out form after form. When that's all said and done, they still have to come home and wait for the loan approval - or, even worse, the denial. With an online loan, you never leave your house. You can prop your feet up in your recliner, fill out the necessary info on your laptop, and have an approval quicker than any bank. When compared to the hassle of a conventional loan, it's easy to see why people choose one over the other.
4. The terms are transparent.
Most online lenders use transparent terms, which means you know the interest rate and payment agreement before you agree to the loan terms. Customers appreciate the honesty and easiness of online loans. There's no haggling back and forth over APR or approval numbers; what you see is what you get.
Once you see the big picture, it's easy to understand why online loans are so popular these days, and alternative lending will likely continue to grow. Traditional loans simply can't compete with the speed and ease of online loans.