Non-bank online loans were created to create an interesting and reasonable alternative to bank loans. It is true that one of the ideas behind payday loans is that people with too low a creditworthiness to take a bank loan can also take advantage of the benefits of loans. However, non-bank loans also have many other advantages that attract various social groups, not necessarily those with low creditworthiness. In such a situation, some borrowers decide to pay back the loan with a bank loan. Is this a reasonable step, who can use it and in what situations will it be profitable? Let’s see.
Where and why does a statistical Pole borrow?
Statistics say that every second Pole in working age is indebted – 7.16 million consumer loans. At least, this is what Akredo’s research for 2016 shows (we haven’t yet seen the official statistics for the previous year). Most of them are loans granted by banks, but according to an analysis of Provident company surveys (2017), as much as 36% of Poles in the event of sudden expenses would reach for a non-bank loan.
Why are Poles increasingly choosing non-bank loans? One of the more important reasons is the aforementioned lack of adequate creditworthiness. The biggest problem with creditworthiness often lies in the fact that banking institutions do not always accept other types of income than those derived from employment under an employment contract. Taking out a loan is also difficult for single parents, for whom an additional source of income will be alimony or 500+ allowance, reluctantly included by banks in their creditworthiness.
Non-bank loans also have other indisputable advantages. This is a lack of formalities and a short time needed to obtain a loan – it happens that cash is needed immediately. The limitation in this case will also be access to bank branches whose network is uneven and may not cover smaller towns or villages. Online loans reach all those who have access to the Internet – over 25 million Poles.
Credit vs. loan
The barrier that can effectively stop borrowers from reaching for a non-bank loan is its costs, which are quite significant compared to a bank loan. It is quite logical if it is assumed that the greater availability of the loan is also a greater risk of its defaulting by borrowers.
If you compare the average cost of credit and loan, then a loan installment of $ 5,000 for 12 months would be about $ 100-200 higher than for a bank. For example, a loan for this amount at Moneymind Bank would cost the client $ 508, and the loan installment would be $ 459 per month. In other banks, costs would fluctuate around the same amounts, only in sporadic cases exceeding $ 500 per month. In one of the cheapest loan companies, the costs would already be over $ 1200, and the loan installment – $ 521. In another company, Monedo Now, it would be 1393 and 533 dollars respectively.
These amounts are not high enough that they are not compensated by their convenience, speed and ease of obtaining a loan. Nevertheless, in some companies, the total fees for such a loan may reach even $ 3,000, which may already be a really inconvenient amount. In such cases, it is worth considering loan repayment.
Payday loans are not so easy
Payday loans have one major disadvantage – as they are incurred for a short period, usually a month, they significantly reduce the borrower’s creditworthiness. It is true that it takes quite a short time, but hardly any bank will agree to provide financing in such a situation. It may not be feasible to reduce the cost of the loan, not to mention that payday loans are often simply free. In this case, if you do not accumulate the right amount to cover the costs of payday loans, an installment loan from a non-bank company or a consolidation loan will be more likely to extend the financing time. The latter are also available in banks, but often these institutions exclude the possibility of repaying non-bank loans. Among the loan institutions providing consolidation loans, we can mention the Ekassa company, where you can count on $ 16 thousand in 12-month installments.
We repay the loan with an installment loan – you need to know that
Repayment of a non-bank installment loan with a non-bank loan is profitable in the case where the loan was contracted due to lack of time to settle credit formalities or from convenience, and the borrower has the financial means to apply for financing at the bank. It may also be possible if the borrower’s financial situation improves while the loan is being repaid. You can then pay back the loan earlier.
Each borrower has the right to repay the loan early at a convenient time. In this case, the lending institution is required to reimburse its client for some of the accrued costs. This will be an amount calculated in proportion to the unused funding period. This solution will be payable if we decide to do it early enough after several loan installments. Considering the smaller APRC of loans, then you can count on savings. If we take advantage of repayment of the entire loan early, in general, you can save from several hundred to well over a thousand dollars.
If you have already paid back half or more of the loan, the costs will not decrease as much as you would expect. So it is not always worth getting involved in one more commitment, which may be cheaper, but it will be borne by the borrower for a long time, and the longer the commitment, the greater the risk on the borrower’s side.