Recently, Sallie Mae flew more than 100 employees to Hawaii to celebrate a record $5 billion in new student loans. Causing the United States’ student loan debt alone to top off around $1.6 trillion. Meanwhile Quicken Loans introduced Rocket Mortgage, the first end-to-end completely online mortgage company, in 2015. According to data published by Quicken Loans, Rocket Mortgage funded $7 billion in closed loans in the following year alone which made up more than 7% of the total profit for Quicken Loans, a loan business that has been around since 1985.
There is a pattern starting to emerge here. Since the advent of the internet, doing business online is becoming significantly easier. But just how Walmart use to be the nations fastest growing business until the advent of technology, traditional lenders and banks are now starting to get more competition than ever online.
What this Means for Consumers
This isn’t bad news for consumers. The lending industry has been restricted and reoptimized so stringently following the aftermath of the 2008/2009 crisis; but all it actually means is that more options are now available to consumers.
That said this is still shocking news overall. Currently in 2019 Quicken Loans holds the most share volumes for mortgages, a whopping 5.7% of total loans while Wells Fargo Bank, a bank that has been around since 1852, is now in second place with 5.2%.
Data suggests that a large amount of consumers are now preferring to do loans online rather than meeting with a banker face to face.
Is there a Right Way to Borrow?
Conventional wisdom does suggest that meeting a banker in person whom can loan within your required range without 2nd/3rd party sign offs may work out better for you overall. If a banker happens to like you that day, sub optimal credit, standard rates, and other fees may end up getting waived as a personal courtesy.
But when people now have a large inventory of lenders to compare from, the consumer is empowered to than pit lenders against each other’s rates. All it takes is a few inquiries, and a few phone calls and an online lender may drop you a half a percent or more, which could save you thousands depending on the length and size of your loan.
Dangers in the Online Lending Market
Because the market is fairly new and all totally done online, trust hasn’t been established yet with some of the newer lenders in the same way the brick and mortar traditional lenders have established themselves.
When looking for loans online one must be vigilant of what a trustworthy site is and what isn’t. Financer.com has taken the guess work out for 27 countries by helping consumers instantly compare loans online from trustworthy sources in each respective country market.
But you must be sure, as with any agreement to read the fine print since the devil is in the detail. Know top to bottom what APR you can be expected to be charged, the length of your loan, and all fine details regarding your agreement with your lender.
Different Types of Lenders
Some online lenders specialize solely in payday loans, while others may have an inventory of loans such as personal loans, home loans, auto loans, small business loans, etc.
Because of this, it’s equally as crucial to make sure you’re making comparisons properly. An online payday loan from a good lender, can feel like a bad deal or like it was from a bad lender if you actually needed a small personal loan with scheduled repayments.
Even though there is more of an ease of access than ever before, it’s still crucial to have patience when making any kind of financial decision.