If you need some extra cash to help you pay for a holiday, start up a business or cover other expenses, a personal loan could be the answer.
If you need some extra cash to help you pay for a holiday, start up a business or cover other expenses, a personal loan could be the answer. But there are questions you'll have to ask yourself on the way. One of the first is which lender you should borrow from.
Traditionally, Australians went to one of the 'big four' banks when they wanted to take out a loan, but the string of scandals over the last few years combined with growing consumer awareness is seeing more people look to alternatives – especially online where personal loans typically have better rates, easier approval and a faster turnaround.
To help you make an informed decision, here are the main points of difference when applying for a loan in person or through an online platform.
How long does it take?
One of the biggest differences is how long it can take to process your loan application and receive your money. If you need money urgently, this could be the dealbreaker.
A traditional bank or credit union can take anywhere from a few days to a few weeks to approve your loan, then it could be a similar wait to get your funds. There can be several reasons for this:
- These institutions usually have stricter lending criteria than online platforms, so may take longer to confirm that you're eligible.
- Loans need to be underwritten by staff.
- If you're applying for a loan with a different bank to your main bank account, you'll have to wait longer for the money to be transferred.
- If you're busy, you might not have the chance to visit the bank in person for a few days.
When you apply for a loan online, you can make your application any time and it will usually be processed automatically. As long as you upload the right documents, your loan may be approved and fully funded as soon as the next day.
Personal loans with Harmoney are usually fully funded within 24 hours and it takes just 1 to 3 business days to receive your money in your account.
What documents do I need?
Making sure you have the right documents ready will avoid delays with your loan application. This is especially important if you're applying in person, as you could waste a trip if you don't have everything the bank needs to see.
Banks typically have stricter loan requirements and need to see more documents than online lenders. Depending on the organisation, you may need to bring along the following to apply for an unsecured personal loan:
- Proof of identity (such as your passport, driver's licence or other accepted photo ID)
- Proof of income (payslips and details of your employment or self-employment)
- Assets (details of savings accounts, properties, vehicles and other assets)
- Liabilities (active credit accounts and other debts)
Even if you have all the documents requested, a bank may turn you down if you have a poor credit rating. Online lenders are more open to low credit ratings and don't normally need to see as many documents.
When you apply through Harmoney, we only need you to:
- Verify your ID (upload or email a recent photo of yourself and your ID, or take a photo using your webcam)
- Verify your finances (upload or email your bank statements or verify automatically using Proviso)
Where can I get the best deal?
A quick comparison of interest rates and other loan terms will show that online lenders typically offer better rates, let you borrow more and give you more flexibility in repayments than banks (though this depends on your credit rating).
The main reason for this is that online lenders and peer-to-peer marketplaces have lower overheads than brick-and-mortar establishments, which need to employ more staff and pay for an expensive high street location. Online lenders can afford to offer more competitive rates.
Harmoney offers unsecured personal loans with fixed rates based on your credit rating and financial situation). Use our free loan calculator to see what type of loan you can expect.
Can I trust online lenders?
One common reason people use traditional banks is because they feel they're more trustworthy (despite the high-profile scandals) and that their money is more secure. However, online lenders in Australia are also regulated by the Australian Securities and Investments Commission (ASIC) to protect the interests of borrowers.
If you want to know if a lender is reputable, check that they're listed in an ASIC Register and have a current Australian Financial Services Licence Number. You should also read online reviews from borrowers to make sure you're dealing with an organisation you can trust.