Need A Personal Loan? Think Twice Before Approaching Your Local Bank
When you need a personal loan or want to open a new line of credit, you approach your local bank. You’ve banked with them for years, hold a current account with them, and maybe even have one of their credit cards. It seems only logical that your bank is the best place to get a loan – but you may wish to think twice on that.
Banks are the only places you can apply for legitimate loans, and we’re not even talking about private online lenders here. Other options exist – and we’ll introduce you to them in this guide, while also explaining why bank loans aren’t always the smartest idea if you want to get control of your finances.
The Downside Of Banks
At the end of the day, every bank is a business, and businesses need to make a profit.
As much as it might act as if it cares, your bank genuinely doesn’t care about anything to do with you, apart from taking your money. Again, it’s nothing personal – this is just business. But how do banks make money from their customers? By charging interest rates (among other things, of course).
And that’s why you need to think twice before applying for a bank loan. It always seems like the easiest option, though a bank loan will come with much higher interest rates than some of the other options out there. This all comes back to the idea that they need to be profitable – so you can’t truly blame them for doing this.
You can get all sorts of loans from your bank, but they will almost certainly cost more than the alternative providers out there.
What’s The Best Bank Alternative?
Generally, you should avoid any private lenders because you don’t know if they’re trustworthy. This leaves you with one main alternative: a credit union. Credit unions offer similar financial services to banks, but with one key difference: they’re owned by a group of members and operate on a non-profit basis.
The goal of a credit union is to provide accessible and affordable financial services – like loans – to members. You’ll have to apply for a membership, but once accepted, it gives you far cheaper loans with lower interest rates, because the union isn’t trying to make a profit. Any money the union makes gets pumped back into its services to provide even better rates on loans, credit cards, etc.
The Upside Of Banks
Credit unions are always better than banks at handing out affordable loans. Having said that, your local bank still serves some good purposes. You might be able to access better credit cards with more unique perks, especially as a loyal customer. Most importantly, banks are better for savings accounts. Ironically, they make more money from savings accounts by slapping on higher interest rates, which means you generate more earnings from your savings.
So, to conclude, think twice about using your bank for a loan and consider joining a credit union instead. You’ll get lower interest rates to make your loans more affordable. If you want to open a savings account, then check back in with your bank.
