The cheapest loans are usually those that have a lower interest rate, so in this article, we will explain what is behind the interest rates on personal loans and we will show you alternative options to traditional banks where you can find conditions more favorable when requesting a personal loan.
How do we know which is the cheapest loan?
The value of personal loans is mainly marked by the interest rate, in addition to the possible commissions that they may have and the links that the client must assume to access the loan or opt for the lowest possible interest rate. All this is collected in the APR of the loan.
To know which are the cheapest loans in this article, we will rely on the interest rate to analyze the differences in the interest rate of bank loans and those offered by crowdlending platforms, in addition to other factors such as linkages or Being a client of a specific entity means that not everyone can have access to certain loans. To know the rest of the features, you can access our ranking of best personal loans.
Thus, we will then make a comparison between the interest rates offered in personal loans by banks and the conditions presented by a Crowdlending platform such as Good Credit to offer cheaper loans.
The cheapest loans from banks
Banking entities apply a higher interest rate than the one published by the Central Bank to obtain a return on their financial products. The difference over that official price depends on many factors associated with the situation and objectives of each bank.
The size and importance of the bank with which the loan is contracted influences the interest rate. Generally, the best value provides more confidence and translates into higher interest rates.
The cheapest Crowdlending platform loans
The difference in interest rates between P2P personal loans from Crowdlending platforms and personal loans with banking entities is that in the case of Crowdlending a personalized study of the situation of each loan application is carried out. In this rigorous analysis, documentation is requested to verify solvency.
If you do not meet the conditions demanded by Crowdlending companies, the loan is not granted. Thanks to this customer filter, the chances of default by borrowers are minimized, so they can be allowed to grant cheaper loans due to the lower total risk of the company.
It should be remembered that Excelend does not hold the status of a credit institution and is not attached to any investment guarantee fund or deposits.
The biggest advantage of crowdlending platforms over traditional banks is that their role consists exclusively in channeling credit to each other so that it is the investors who obtain the highest profitability and the borrowers the best possible financing conditions so that both parties get a better interest rate.
This happens with Good Credit personal loans, a platform that aims to put individual investors in contact with those who need financing. They are P2P loans, in which the investor deposits his money in a fund is the organization that decides where to allocate it. After studying the situation of those seeking financing, they are offered a repayment term and fees adapted to their needs.
Comparison between personal bank loans and Crowdlending platforms
As we can see in the previous table, there is a difference of almost two points between the interest rate offered by banks and Crowdlending platforms in personal loans.
Thanks to their business model, Crowdlending when operating 100% online, do not have to maintain large offices for the development of their activity and thanks to the fact that they reduce the risk of each client to the maximum, they can afford to grant cheaper loans for those who Look for financing.
Loans from other types of entities such as Good Finance and their home equity loans have not been taken into account since to access them there are different requirements, such as in this case having a home free of charges as collateral, which allows Offer lower interest rates.