The answer to this question lies with the borrowers themselves: all those who want to apply for a loan can be divided into 2 categories. The first one, without difficulty, will take out a loan at any bank, and the second one will have to look for much easier ways to get cash assistance.
It is understood that non-bank credit is not executed at the bank or even at its branch. These are other entities that operate without their own capital, such as pawnshops, credit unions, unions and microfinance organizations. The loan products of such companies will cost the borrower more expensive than the banks, and the lender will not be interested in the borrower’s credit history or income level. Because of this loyalty, non-bank loans are issued to almost everyone, and if you can count on statistics, only 5 out of 100 applications are rejected…
Peculiarities of non-bank loans
The core of the work of these credit organizations is to pay as little tax deduction as possible. Therefore, their operation is based on the provision of loans against collateral of any property belonging to the borrower. But non-bank credit is fully legalized. The credit organization only has to open the relevant activity and has the right to extend loans to any person who wishes.
In addition to their core credit activities, financial organizations can provide other services:
- Currency exchange.
- Escorting business cash.
- Granting of non-bank loans to individuals.
- Bank card servicing.
Each of these services will provide a small income to small credit companies and a whole set of such services will provide a good basis for securing loans. In addition, it is important that each line of business is licensed. The absence of a legal basis for the provision of such services may lead to the suspension of all work of the company.
The difference between banks and credit organizations
Non-bank organizations have the right to issue consumer loans to citizens at the expense of the profits they receive, but they do not have the right to move cash flow or open deposit accounts to raise precious metals.
When comparing the requirements of banks and credit institutions to the borrower, the latter are much more lenient and loyal to their clients. Even those who have outstanding loans, late payments and damaged credit history can obtain non-bank credit. However, along with the advantages of non-bank loans, potential borrowers also need to keep in mind the specifics of this financial assistance:
- Non-bank loans do not offer large sums. If you need a large sum of money, such a loan will not satisfy you.
- The interest rate on using a non-bank loan is much higher than a bank loan, so you have to prepare for either a quick repayment or a big payment.
- Often, borrowers are not initially informed of the real annual rate, which results in the payment of the target amount together with hidden payments.
The main “plus” of a non-bank loan is that you will not need to present income statement and other paperwork that is often unavailable for it.
Conditions and classification of non-bank loans
Non-bank loans, like bank loans, fall into several categories depending on the purpose for which the money is needed: purchase of an apartment, car, education, treatment, etc. This is what determines the maturity of the loan. But, unlike bank credit, non-bank loan processing is available to a student who has only recently reached the age of 18 and to people of retirement age.
On average, non-bank loans can be processed within 1 hour. If the loan amount is large, the lender will ask for a pledge in the form of a car or real estate. The money received in this way can be spent to repay existing loans or other debts. The creditor does not oblige the borrower to account for the money spent: money can be spent even on daily expenses.