Storefront Lenders and the History of Loan Business in the US

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Getting a loan from a bank can involve a lot of paperwork and time, something that you might not always have on your side. Sometimes, the stress of it all can take a huge toll. However, getting a loan from other sources is relatively easy and quite common. But how did loaning become so popular in the United States and what are the best options out there?

A Brief Dive into Loaning History

Today, you can easily get a loan from storefront lenders or even online lenders, but this was not always so. Loans became more popular in the 18th century when lenders would require collateral before they provided the loan amount. This was a way to secure their money, and it is something that is still done in some cases.

Another type of loan was that in which rich people lent money to poor people; instead of paying them back in cash, the person who received the loan would work for the rich person until the debt was paid. However, as the industrial revolution changed the world, it also changed the loaning landscape. As centralized banks were set up, loans became more widely available to every American. The very first bank to offer loans in a standard manner was the Philadelphia Savings Fund Society.

As technology advanced, so did the loaning system. Storefront lenders appeared as well, but digital changes accelerated the adoption of credit and debit cards, which started as cardboard cards. In 1959, cards became a way for lenders to evaluate the credit of a person and decide whether to loan them money or not.

As computers started to reign in 1985 and onwards, online loans made an appearance, and they have dramatically changed the loaning world. However, storefront lenders have survived, as there are many benefits to getting a loan at a physical location instead of online.

Storefront Lenders: Benefits and Challenges

These lenders have a brick and mortar place of business, which can be reassuring for many customers. While money is now more digital than ever, face-to-face interaction with sensitive matters such as a loan is preferred by many. Furthermore, the applicant can get quick answers to any questions or doubts they might have, something that is very important when talking about a loan. Some additional benefits of going to a storefront lender are:

  • Immediate cash. People who go to these types of lenders can get their money in cash, something that is incredibly convenient if there is an urgent need for the loan. Whether the person needs to make a deposit or pay a debt in person, cash can make things a lot easier for them.
  • Flexible terms. Compared to traditional banks, these lenders have much more flexible terms, which makes them more attainable for people who might not have the best credit score. These lenders can offer certain requirements that can be more easily met by the applicant.
  • Increased trust. Storefront lenders follow the regulations that are stipulated in each state, something that an applicant can easily check. This makes many people feel more trusting towards these lenders. In addition, applicants always know where to find the lender as it is a physical store. Therefore, they can just go there and talk with someone in person if there are any issues.
  • Lower interests. Since these lenders follow state regulations, interests tend to be lower than those that come with online loans, which is definitely a benefit.
  • Expediency. Getting a loan at these places can be very quick as they immediately evaluate the application, make a decision, and provide the money when the loan is approved. It doesn’t get any faster than that.

While there are many benefits to getting a loan from a storefront lender, this is not without its own set of challenges:

  • Post-dated check. In certain cases, storefront lenders might ask for a post-dated check as a way to ensure they will get paid. This will be due after the date in which you are supposed to pay the loan. Unfortunately, not everyone can comply with this request, which might make them ineligible for a loan.
  • Payday loans. Getting a payday loan can be the only option offered by storefront lenders depending on your credit. This means that you will be committing to pay the loan with your next paycheck if you have not returned the money before then. These often have high interests, but can be a real problem-solver.
  • Convenience. Even if you meet all the requirements, going to the brick-and-mortar location can be a hassle. Maybe you do not have the time or there are no storefront lenders close to where you work or where you live. This is where online lenders might come in handy.

Online Lenders: The Most Practical Option… Or Is It?

Online lenders have become incredibly popular in the past few years. People can simply go online and compare among different lenders to see their requirements, interest rates, and more. There are even websites that make a comparison for you, making things even easier. What are the pros of these types of lenders?

  • Access. You do not have to leave your house to apply for a loan online. All the requirements can be sent by email, and you can do this from your desktop, laptop, and even your phone. It is very convenient and most platforms are relatively easy to use.
  • Anonymity. Of course, the loan will not be truly anonymous as the lender still needs your personal information; however, some people might feel embarrassed by having to ask for a loan. This way, they do not have to interact with another human being, and this might make the process easier and less stressful.
  • Varying rates. Online loans can have a wide range of percentage rates. These might start as low as 6% and go as high as 36%, which is likely to depend on your credit score, the amount loaned, regulations, and the terms of the loaner. Amounts can go from $1,000 to $100,000. Furthermore, if you have good credit, you might have access to benefits such as skipping one of your monthly payments.

While there are many good things about online loans, there are also some aspects that can make it very difficult for you to get a loan this way or that might simply not work for you. Some of these are:

  • Credit. For online lenders, it can be very difficult to get a good read on how reliable you are, which is why they heavily rely on your credit score. This means that many of them only provide loans if you have a good or excellent score. Meanwhile, storefront lenders can be more flexible and develop payment plans that are more tailor-made to your needs and situation.
  • Time. While there are online lenders that work quite fast, there are others that have a slow process, which might not be the best option for you if you need the money as soon as possible. The majority of them have a pre-qualification process, adding an extra step to your journey of getting a loan.
  • Doubt resolution. Some online lenders have a comprehensive FAQ section on their website and they have integrated bots or even customer service agents that can solve your questions. That said, many people consider it easier to simply talk in-person with a worker at a brick-and-mortar lending business.
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