One of the most popular ways to get a loan is to apply with a bank. However, not always does this attempt come up with a happy ending. There are standard criteria of lending with less scope of flexibility.
Thus, you cannot expect to take advantage of customisation as you can with a direct lender. Now, if you have poor credit scores, you cannot borrow money from a bank. These scores should be favourable, or else you will not be able to qualify.
On the contrary, you can get no guarantor loans from a direct lender despite your unfavourable scores. This is because of their flexible approach, which provides an opportunity for everyone going through financial distress. Here, your affordability will grab more attention as these lenders curate a repayment pattern accordingly.
However, if you want an established and safer way of borrowing, banks can be the most suitable option. There will be hard credit checks, which will not bother you if your scores are stable. Because of this step, bad credit does not get any consideration.
This way of lending has some downsides that you must know if you are in a dilemma regarding direct lending.
Setbacks of getting a loan from banks in the UK
These lending sources are known for their broader service options and authenticity. Now, the availability of loans from direct lenders might make you think twice before getting loans. It would be great if you could closely analyse both options.
Usually, you are aware of the pros of getting loans from banks. People talk about it openly, and you must have heard a lot about choosing banks over anything else. You must make a rational decision, and this can be done after knowing the cons as well.
Slow approval process
Oftentimes, people drop the idea of getting loans because of the elaborate process. Do you know where it has come from? It is usually in the banks where you have to wait for days and weeks to get a verdict on your loan application.
The approval process is slow, and you cannot rely on them to fulfil short-term necessities. Thus, if you are facing an urgent necessity, this lending option is not going to be a suitable choice for you. Immediate payouts cannot be managed by taking out a loan from banks.
Besides, the documentation part stretches so much that the ultimate processing will take forever to complete. Thus, for on-the-spot funding, you cannot count upon this option.
Uncompetitive interest rates
You will have to accept the standard rate of interest set for you. There will be no provision for pre-approval, wherein you can assess rates before accepting. The loan provider will not set the rate based on your financial condition.
Again, if you choose a variable rate of interest with loans, you must be prepared for big surprises in the future. At times, the cost can become unmanageable for you because of a hike in rates. The overall borrowing endeavour will turn so expensive that you cannot afford the payments.
Mostly secured loan options
If your financial life has some downsides, you will have to arrange assurance in other ways like a guarantor or collateral. Besides, for a bigger borrowing limit, you will be required to pledge collateral. Thus, your assets will be at risk as lenders usually do not seek loan payment assurance in other ways.
When collateral is involved in borrowing, there will be a fear of losing it. If you cannot make it to repaying loans on time, you will no longer the owner of the asset. To overcome such complexities, you can try evaluating the extent of risk before opting for loans from banks.
Credit scores might get blemished
As credit checks are a part of lending, this will leave an imprint on your credit history. This is unavoidable when you are applying for loans with a traditional lender. If you have applied with multiple banks at the same time, your credit scores are going into their worst phase.
Do not mistake it for a pre-approval facility available with direct lenders. You can pre-qualify with multiple lenders at the same time without feeling any impact on your credit scores. This is a pre-step of borrowing and does not require you to disclose your credit scores as well.
If you are not sure, it would be better to approach multiple traditional lenders at the same time. Low credit scores will affect your potential to borrow money in the future.
No personalised experience
As banks manage a large customer base, they are least interested in offering a personalised borrowing experience. You will have to accept whatever comes your way. If the terms and conditions seem unacceptable, you can ultimately deny getting loans.
You cannot expect a bespoke loan offer matching your requirements and financial capacity. Banks do not have time or interest in coming up with such offers. If you want to make sure that you get the best terms and rates, direct lenders can be an ideal choice for you.
There will be no compulsion on you to accept the pre-approved offers. Above all, credit checks will not be conducted upfront. Personalised offers let you choose a loan amount accordingly.
It should be something that allows you to repay without any fear. At the same time, you can compare loan rates obtained from different lenders. Pre-approved loan proposals let you have a glimpse of the prospective offer.
You can stack one offer against the other to see which one has the most suitable loan rates. This is not possible when you prefer getting loans from banks.
The bottom line
Maybe you do not have to cover any upfront fees. However, you might have to encounter different types of fees charged by them in different names. Be prepared to afford arrangement fees, which can be avoided when you are applying with a direct lender.
Besides, there will be pre-payment fees, which can be ignored when you borrow money from alternative lenders. If your financial situation has improved, you cannot think of paying the outstanding amount in advance. You can talk to banks before going ahead to understand how many additional fees you must pay.
