There are many reasons why you may opt for non-traditional lending institutions. It could be that you are no longer credit worthy or that you have low credit limit. It could also be that you are in need of quick money and are escaping the time consuming process that is borrowing money from a bank for instance. Whatever your reasons, if you fall into any of these categories, there are some loan sources that would suit you
Peer to Peer Platform
This is where you use an online lending platform to borrow money. The process involves you registering into the online platform, selecting a suitable amount and based on a person’s creditworthiness, their loan request is accepted or denied. Such website promise borrowers a lower interest rate than that of banks but that is not always true. However they are quicker and easier to source money from. Their downside is that a missed loan repayment can result in a huge blow to your creditworthiness. You need to be wary of that. Also if you have a poor credit score, their lending rates might be worse than those of banks.
Credit Unions have existed since the 1940s and consist of a group of people who have a common bond and have come together to save and provide financial assistance to one another. In the UK these unions are controlled by Financial Conduct Authority and the Prudential Regulatory Authority. To apply for a loan from a credit union however, you will need to be a member. Because they wouldn’t want to burden any member, they lend at low and affordable rates and according to a member’s income. Additionally since they are not for profit, their profits go into bettering its members’ lives. Their drawback is that usually they are a bit private. That is, their membership is restricted to a particular group of people for instance a certain profession.
Home credit or doorstep lending
This is where a lender loans you money and comes to collect repayments at your doorstep. The repayments are either weekly or fortnightly. They are different from loan sharks since they are regulated by the Financial Conduct Authority (FCA).They are a quick way to borrow with minimal paperwork and, you can borrow money that ranges between £50 and £500. However they have a very unpleasant downside. Since the money is usually unsecured, they offer very high interest rates as high as 1500%. Failure to pay on time results in an even higher repayment rate. It is very easy for your debt to spiral out of control. This is a method that is highly discouraged by money advisers.
Logbook loans are loans that are taken against your car. The lender becomes the de facto owner of your car until you pay back the loan. The loan you take will be between £500 and the value of your car. However, when you hand over the logbook, you will still be allowed to use your car as long as you are servicing the loan as agreed. Failure to meet a payment will result in the repossession of your car as long as the lender has taken a bill of state. Repossession can be done without a court order. Also in the event that the car is repossessed, if its value falls short of the loan amount, the borrower will be entitled to provide the difference. When taking logbook loans it’s best to be smart, make payments as soon as you can but be wary since early repayment may lead to extra charges. Also only take logbook loans when you really need them.