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1. Would you pay for personalized loan service?
One of the obvious differences between bank and online lenders is the face-to-face exchange you can have at a physical bank.
If you value personal interaction and the security of knowing who is handling your loan, a bank might be for you, says Eric Simonson, a Minneapolis-based certified financial planner and owner of Abundo Wealth.
“Some people like to just know that there’s a … person that makes sure the loan goes through smoothly for them,” he says.
Also, you may have the opportunity to negotiate a lower rate or qualify with a lower credit score if you’re talking to a person you already have a relationship with at a bank, Simonson says.
But the personal touch might come at a premium, says Oklahoma-based CFP Kyle Jackson. He says brick-and-mortar banks tend to pass on to the consumer operational costs that online lenders don’t have, which can result in higher rates or fees.
2. How fast do you need the money?
If you need a loan quickly, online might be the way to go.
Online lenders — and traditional banks with an online option — can sometimes process an application and make a decision more quickly than banks that don’t have an internet presence, Jackson says.
Some of those lenders can fund the loan the same day you apply, or the following business day.
Lenders with an online presence can also expedite your research process if they post their rates, says Todd Nelson, senior vice president with LightStream, the online lending arm of SunTrust Bank.
“If you’ve got good credit, you don’t really worry whether you’re going to get approved,” he says. “What you’re more concerned with is ‘Am I going to waste my time with applying for a loan and getting back an offer I don’t want?’”
3. Are you comfortable applying for and managing a loan online?
For an online loan application, you’ll need to electronically share information like your Social Security number, education history and bank account information, which might require granting the lender a
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