Bank loans or non-bank loans – which are better?


In recent years lenders of non-bank sector have became very popular. There are a lot of different advertisements that we can get the money in couple of minutes and that SMS credits are appropriate for almost everyone. However, there may arise a question about adequacy of bank loans and non-bank loans for different expenses. Expenses may be different and also needs for loans may be different. To understand which lender is more appropriate in your case, you have to understand your needs regarding to receiving of loan.

Banks are forming loan commitments which are measured in several hundreds. It is hard to imagine that we go to the bank in order to get, for example, 50 lari. Banks as lenders are more appropriate for long term loan commitments. Banks annual percentage rate or APR is few tens of percents which, for example, during 10 years form quite big amount of money, therefore, it is profitable for banks to lend the money for such a long time.

Non-bank lenders offer loans with interest rates which are measured in several hundreds of percents, therefore, it is unlikely that someone would want to borrow any amount of money with such interest rate for several years. Non-bank lenders offer loans for relatively short time which is usually one month or 30 days, and also offered amounts of money are smaller than those which are offered by banks. If banks can lend, for example, 80 000 lari for home purchase, then non-bank lenders can lend only 800 lari which is insufficient for home purchase. This high interest rate is applied for short period of time, but as the name of this rate is annual rate, not monthly rate, it is calculated for one year. For this short period of time an interest rate has to be high enough, so it would be profitable to a monthly basis.

Banks and non-bank lenders differ from each other with requirements for their potential clients. Banks require stable and sufficient income in other to receive the loan, as well as the pledge and the guarantee, depending on the type of the loan. Client has to ensure a specific credit collateral, so the bank would be safe, that the loan will be repaid. Non-bank lenders do not require nor pledge, nor guarantee – potential client has to have income which can serve as repayment means. Non-bank lenders evaluate their clients, but issued amounts of money are smaller than bank loans, therefore, income does not need to be so big and that is why any pledge or guarantee is not required.

Non-bank SMS credits are popular because of fact that they can be received in a couple of minutes. If you need a money immediately, loan from non-bank lender will be appropriate. If your wage hinders, but you need to make an urgent purchase, non-bank loan will be a fast solution for your financial problems. If you want to buy a house or a car, or you want to study in a university, it is recommended to choose some bank. Expenses, as mentioned before, may be different, therefore, you have to choose the most appropriate lender in every situation individually.