Alternative lending provides mortgage loans to individuals without going through traditional lending institutions, such as big banks. Typically, alternative lending is quicker, more flexible, and features a higher loan approval rate than bank financing.
Despite these positive attributes, many people have negative misconceptions about alternative lending… so we’d like to clear a few things up. Here are the top 5 misconceptions about alternative lending:
While it’s true that many would-be home owners and businesses owners find it easier to qualify for a loan from an alternative source than from a bank, many owners prefer dealing with alternative lenders, as they tend to be more flexible, less judgmental and faster to respond. Many alternative lenders can process an application in a few hours and fund a loan within a day or two.
Alternative lenders would soon go out of business if they lent only to clients with little or no hope of repaying their loans. In truth, banks turn down loans for all sorts of reasons, many having nothing to do with creditworthiness. Alternative lenders work by assessing the risk of each loan and assigning a corresponding interest rate. Any good alternative lender wants to see its borrowers succeed and will usually work with them to come up with tailored solutions for repayment.
There is simply no truth to this statement, and in fact the opposite usually applies: If you pay back your loan responsibly, your credit score should increase.
Alternative lenders provide great solutions for borrowers who, for a myriad of possible reasons, don’t qualify for a loan from a traditional lender. Often times these alternative loans are exactly what the client needs to bridge a difficult time and ultimately establish a better credit rating. Meaning it’s entirely possible that their lending profile will improve in the future, and they will be able to seek financing from traditional lenders.
The same consumer protection regulations that apply to traditional banks apply to alternative lenders, which is mainly because the lenders receive funding money from banks.
Alternative lending offers a practical path for certain applicants and shouldn't be dismissed outright. Many times, it serves as a stepping stone towards transitioning to traditional bank lending. Team Sammy Hammouda will collaborate with you to create an end-game plan tailored to your needs. By understanding how alternative lending functions, borrowers can confidently navigate their options, tapping into its benefits to achieve their financial goals and objectives.
