Let’s play “Would you rather?” Would you rather: borrow money from a loan app or a traditional bank?

Got an answer? Don’t say it just yet, luv. You might regret it! Read this blog and learn the differences between traditional lending and loan apps first! 

What are the Advantages of Using a Loan App Over Visiting a Bank?

• Convenience: Plain and simple. Using a loan app, you can apply anytime, anywhere. You won’t have to brave the rain or scorching heat just to get the funds you need.
• Speed: Most loan apps are fast – as in, “Get your loan disbursed within minutes” fast. On the other hand, you may need a few days or maybe even weeks with traditional lending.
• Accessibility: All you need is a smartphone and an internet connection! As for requirements, you won’t need physical paperwork. Just upload digital versions in a few taps!
• Competitive Rates: A lot of loan apps are able to offer competitive interest rates because they don’t have physical branches, resulting in lower overhead costs. 

What are the Disadvantages of Using a Loan App Over Traditional Lending Institutions?

• Higher Interest Rates: Unfortunately, some loan apps charge higher interest rates compared to traditional banks, especially for unsecured loans.
• Hidden Fees: Some apps sneak in hidden fees just to make a quick peso. That’s why you should always read the Terms and Conditions thoroughly!
• Security Concerns: There will always be a security risk with loan apps since you’ll be sharing personal and financial information online. Instead of opting for a loan app, you can choose the safer option: a BSP-licensed neobank like Tonik! 

What are the Interest Rates Compared to Traditional Bank Loans?

Interest rates for loan apps can vary significantly, and, unless you’re eyeing a secured loan, it’ll depend mostly on your credit score. Other factors include your chosen loan amount and repayment term.  

That’s why it’s important to start building credit as soon as possible. You can also get a loan like Tonik Credit Builder Loan, which allows you to borrow up to P20K and helps you improve your credit at the same time!

On top of interest rates, you should also be aware of certain fees:

• Processing Fees: A percentage of the loan amount charged upfront.
• Late Payment Fees: Penalties for missed or late payments.
• Service Fees: Monthly or annual fees for maintaining the loan. 

Is my personal and financial information safe when using these apps?

That depends – are you choosing the good ones? Choose the loan apps and/or neobanks that employ the following to keep their users safe:

• Data Encryption: To ensure data is transmitted securely.
• Two-Factor Authentication (2FA): To verify user identity.
• Secure Servers: To store data safely.

Oh, what a coincidence. Tonik Bank does all of those!

Additionally, legit and reputable loan apps comply with data privacy regulations such as the Data Privacy Act in the Philippines. If you picked a good one, you’re more than likely to be in good hands. 

What are the eligibility requirements for using a loan app?

Eligibility requirements for loan apps can be more flexible than those of traditional banks! They’re not all the same, but here are a few of the usual suspects:

• Age: Typically, applicants must be at least 18 years old.
• Income: Proof of regular income is usually required, though the threshold may be lower than that of banks.
• Identification: A valid government ID (e.g., passport, driver's license).
• Proof of Income: Payslips, bank statements, or employment certificates.
• Contact Information: Phone number and email address.

How Fast Can I Receive the Funds after Applying Compared to Traditional Loans?

Like we said, loan apps generally offer faster fund disbursement compared to traditional banks. Loan apps can approve and disburse within minutes, while traditional banks can take days or weeks.

So... App or Trad?

What’s it going to be, luv? App or trad? Whichever you choose, make sure it’s the one that’s best for you!

No hard feelings if you choose to go traditional. We’re just saying, though, that it’s clear as day: loan apps and neobanks are more convenient, faster, and accessible!

There may be security concerns for non-banking lending apps, and sometimes interest rates are higher compared to traditional lending institutions, but it’s just a matter of choosing the right one.

If you’re going for loan apps or neobanks, choose us. Download the Tonik App today!