Fintech Lending – How Does It Compare With Traditional Lending?

by fintech herald
Editorial & Advertiser disclosure

Fintech lending, better known as digital lending, has allowed many small business owners to take advantage of faster cache access, as well as lower interest rates, shorter repayment periods, and ease of access from all financial institutions. In the past, obtaining capital through traditional means meant heading to your local bank, filling out an application, and getting a business loan in a matter of weeks or even months. Those days are gone. In today’s world, the Internet is the preferred lending source, as well as the most convenient for borrowers. Today’s lending market offers a wide variety of options and rates.

Traditional banks often have varying rates and terms and cannot guarantee all applicants. Small business owners may also have trouble securing additional funding from other financial institutions. Internet-based lenders offer a hassle-free experience for both borrowers and lenders. It does not matter where in the world you are located, you can obtain the necessary funding for your business from the comfort of your own home. Fintech companies are available for borrowers everywhere and can provide borrowers with the money they need.

One of the advantages of fintech lending is that borrowers do not have to worry about paperwork. All applications are completed online, through a secure website. With an easy application process and quick approval, borrowers can access the cash they need and make all required payments on time. The suggested citation for this type of finance is convenience.

There are many different reasons for using internet-based services for small business owners need funding. When traditional banks would consider financing a business, they would consider a borrower’s credit history, income, and collateral. With online-based services, Fintech companies review and consider all factors involved before applying. If a borrower has a good credit history, or collateral such as a property, traditional banks are more likely to approve a loan application.

Traditional banks make all loans using a fax system. Lenders also require a physical application. Fintech companies make online applications that can be filled out within a matter of minutes. Once approved, the funds are wired directly to the borrower’s bank account. This eliminates paper work and makes the entire process seamless.

Traditional banks typically set interest rates for loans based on credit rating and income level. Fintech companies do not use credit scores, income levels, or any other form of standardization. In fact, because of the large amount of risk involved in online-based lending, borrowers can usually find competitive interest rates. Traditional banks make it their mission to control their competition by allocating funds to those who have the best risk potential.

Another benefit to borrowers is the availability of Fintech financing. Traditional lending institutions must conform to federal and state laws that limit how much they can lend, and the time frame in which they can do so. With fintech technology at their disposal, big data can be used to identify appropriate risk profiles of borrowers. The banks no longer must prioritize whom they lend to based on paperwork alone.

Lending to Fintech startups is a great way for small businesses to receive the financing they need when it’s most critical. Traditional banks don’t have the technological infrastructure needed to provide online lending solutions. Fintech companies can provide secure, convenient, and effective loans to small businesses. When traditional banks get involved with fintech, they will likely adopt this new technology themselves. Small tech companies are the wave of the future – and the sooner the small tech companies can start making loans to small businesses, the sooner we can all benefit.

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