Why is it so hard to get an emergency loan from a bank?

Traditional lenders like banks follow a strict regime when it comes to approving loans. It is not that you cannot get financial help from them. However, obtaining quick financial support can be very challenging.

There are various things that need to be scanned and this can take some time. Now, when you search for speedy loan assistance, your necessity will be for a trivial amount. This is something impractical to get from banks because of the procedures and obligations they may impose.

Hard verification of your credit profile is a crucial step that cannot be skipped. Thus, when you apply with a bank, you will have to think of facing an unwanted imprint on your credit history. Now, if you already have low credit scores, a hard search will be fatal for your finances.

You can avoid the hassle and struggle to get help from banks. This is because you can get emergency loans for bad credit from a direct lender now. These loans are perfect for any short-term emergency.

You do not have to go through a lot of formalities or stringent lending rules. Since you have an alternate option now, you can compare and check which one will suit you better. Furthermore, this blog will let you know more about the reasons why banks might not be a suitable option to borrow money.

Reasons for not being able to get speedy support from banks

A traditional lending source is always a safe and preferred option to get external funds. However, fetching money on the spot is not as easy as said. Some of the aspects make this lending option unfit for emergencies.

Complexity of formalitiesComplexity of formalities

You might have an idea about the format every bank follows. It begins with paying a visit to the bank branch to collect the application form. Then, you will have to fill it out with the correct details.

Now, here, you must know that, unlike, direct lenders, with bank, the application step might elongate. You will have to produce a lot of details. Besides, a few documents will be crucial for your application.

Again, after completion, you will have to submit the form in person to the bank. These steps are just for the application process and as you can see, they can take a lot of time. Thus, when you are already running short on time, a single second counts a lot.

Instead you can opt for direct lenders, they can provide you with quick money. Furthermore, the conditions are practical and application can be submitted online.

Processing time might extend

Credit checks are mandatory when the lender has to decide whether or not approve funds. This is a time consuming process and credit records need to be fetched and verified. Besides, there might be other checks that will be mandatory for banks and you cannot skip them at any cost.

These checks will elongate the processing time and you cannot anticipate to get speedy approval. On the flip side, a direct lender will not conduct a credit check upfront. This is possible because they provide pre-approval which does not need any information about the credit profile of the borrower.

An affordability check is mainly done at this stage to determine whether or not the borrower can pay back loans within the given time. Credit checks are not necessary at this stage but are vital ahead of the final processing of funds.

When you have to take out a small amount of money, these lenders just need strong financial standing currently. This helps them to ensure if repayment can happen on time from your end.

Interest rates will be high

When the risk factor increases, traditional lenders are most likely to charge high interest rates. This is done to compensate for the risk. However, paying a heavy price for urgent money for a small need might not seem meaningful.

This happens especially when alternate options like online lenders are making borrowing more convenient for you. With mainstream lenders, you hardly get any chance to compare loan rates. You can take advantage of pre-approval facility which will be mainly available with direct lenders.

This particular direct lending feature allows you to collect offers from different lenders at the same time. The best part is that this is possible without facing further blemishes on the credit profile. A soft analysis to understand your affordability will be necessary.

However, this will not be recorded as a credit activity. Thus, your credit scores will not have to suffer. You can as many pre-approved offers as possible and compare rates.

This comparison lets you understand where you can get affordable rates. Based on your findings, you can choose the loan lender. Thus, the chances of getting loans at feasible rates is higher with online lenders.

When you are applying for emergency loan with a bank, you might not get enough opportunity to enjoy some flexibility. You might have to accept whatever rate of interest has been offered by them.

No compulsion for assets

To balance risk, banks might even ask for some guarantee in the form of assets. Here, when you run through an emergency situation and need loan, you might not be ready to keep your assets at risk. You know that if you fail to repay loans, your assets will be gone forever.

Collateral is an assurance that you will surely come back to repay. If this does not happen, you will have to face the consequences. On the contrary, a direct lender would never ask you to pledge assets for short-term funding.

Your affordability will matter to them the most. Above all, they will plan repayment in such manner that there will be no scope to fail. Unlike mainstream lenders who might need you to repay at once, you can pay back in the form of instalments with direct lenders.

The bottom line

If you are in a dilemma to decide whether or not to apply for emergency loans with a bank, find out the difficulty you may face. Now, for certain types, of borrowing they are the perfect option. For pressing needs, they might not be the right option.