News & Events

Personal Loan 101: Bank Loans vs Private Lender Loans

Loans vary, depending on your needs and preferences. If you decide to open your own business, you would need capital, or the preliminary amount that you would use to startup your venture. You would like to start immediately, however, your savings aren’t enough to accommodate the overall capital itself. So you choose to borrow money for your business; in short, you apply for a loan. In such case, you have two choices; one is a bank loan while the other is a private lender loan. You’re not sure which to take up, so you do your own research. No need to look further though, as we had enumerated a few differences to help you decide:

Bank Loans offer lower interest rates than Private Lenders.

You read that right, they do offer lower rates. You may be wondering why. Well, banks have lower cost of funds than lenders. Depositors keep a lot of money in their checking and savings accounts, hence, banks have easy access to those funds to lend out. And, if banks don’t pay interest for those deposits or pay very little interest then those funds are very cheap for the bank to use. It is also notable that Private Lenders borrow the money that they’re going to lend from the bank itself, which is why they have a higher interest rate, since additional fees would be given to the “middle man,” in this case, the lenders themselves.

It is easier to get an approval from Private Lenders.

Just when you thought that the first pointer would convince you to immediately apply for a bank loan, you end up reading this second pointer, which is to say that it is much easier to get an approved loan from a Private Lender. The reason for this, you may ask? While banks definitely have the freedom to lend out funds at lower rates, they hardly do. Banks are the main rivals of Private Lenders, which is why they would just need to lower their rate a little in order to make you decide in choosing them instead. If the Private Lenders offer you a 10% interest rate, the banks (cunning as they are) would only have to charge you 9.8% in order to convince you that they are a much affordable choice. Aside from this, they would also require a lot of paper work and pre-requisite documents, unlike Private Lenders.

Go for the one which you will most likely get approved for.

This is the best factor to consider. Don’t feel bad for not getting your preferred method, you may try out for the other one and try again in the future, when your business is finally reaching its peak. The best thing about having two types of loan is that you are not restricted to just one method. Do your research, learn from every mistake, and strive to achieve the loan that would be most beneficial to your business.

Get a jumpstart on your business venture with a trusted name that offers only the best service possible. Cebuana Lhuillier’s Lucky Loan is definitely your top choice. It is a multi-purpose loan offered to registered entities such as tricycle operators, credit cooperatives and other groups, as well as SMEs such as restaurant and mini groceries, among other businesses. Our network of more than 2,000 Cebuana Lhuillier outlets and online presence give customers unlimited access and utter convenience in applying for a loan.

Image Source: