As traditional lending institutions continue to tighten their lending requirements, many consumers are turning to alternative options for fast cash. With the rise of the digital age, a variety of new lending options have emerged that cater to the needs of those who require quick access to cash. In this article, we’ll explore some of the alternative lending options that are available and how they stack up against traditional loans.
Crowdfunding
Crowdfunding has become a popular way for individuals to raise money for various projects, causes, or personal needs. Crowdfunding platforms allow individuals to pitch their ideas or needs to a large pool of potential donors, who can then contribute any amount they choose. Some of the popular crowdfunding platforms include Kickstarter, Indiegogo, and GoFundMe.
According to Statista, the global crowdfunding market is projected to reach $300 billion by 2025, up from $84 billion in 2020. This highlights the growing popularity of this alternative lending option.
Online Pawnshops
Online pawnshops are a relatively new alternative lending option that has gained traction in recent years. They allow individuals to pawn their valuables, such as jewelry, electronics, and collectibles, to get a loan. The loan amount is based on the value of the item being pawned, and the individual has a set amount of time to repay the loan, along with interest.
One of the advantages of online pawnshops is that they are more convenient than traditional pawnshops, as they allow individuals to pawn their valuables without leaving their home. Some of the popular online pawnshops include PawnGuru, Borro, and Pawngo.
Microloans
Microloans are a type of small loan that are typically given to individuals or small businesses that cannot access traditional loans due to their credit score or lack of collateral. Microloans are often provided by non-profit organizations or online lenders, and they typically have lower interest rates than traditional loans.
According to Forbes, the global microfinance market is projected to reach $343 billion by 2025. This highlights the growing popularity of this alternative lending option, which is especially useful for those who require a small amount of cash.
Peer-to-Peer Lending
Peer-to-peer (P2P) lending is a type of lending that involves individuals lending money to other individuals, without the need for a traditional lending institution. P2P lending platforms match borrowers with lenders based on their credit score, and the lenders can choose how much money they want to lend and at what interest rate.
According to Statista, the global P2P lending market is projected to reach $1 trillion by 2025, up from $67.9 billion in 2015. This highlights the growing popularity of this alternative lending option, which has the potential to disrupt the traditional lending industry.
Merchant Cash Advances
Merchant cash advances are a type of financing that is based on future credit card sales. The lender provides a lump sum payment in exchange for a percentage of the borrower’s daily credit card sales until the loan is repaid. This alternative lending option is useful for small businesses that require quick access to cash and have a consistent flow of credit card sales.
According to the Small Business Administration (SBA), merchant cash advances have grown in popularity in recent years, with over $10 billion in funding provided to small businesses in 2019.
Salary Advances
Salary advances are a type of loan that is given to employees in advance of their regular paycheck. This option is useful for individuals who need fast cash and have a regular paycheck coming in. Salary advances typically have lower interest rates than traditional loans, making them an attractive alternative option.
According to a survey conducted by PwC, 32% of employers in the US offer salary advance programs to their employees, highlighting the growing popularity of this alternative lending option.
Invoice Financing
Invoice financing is a type of financing that allows businesses to borrow money against their outstanding invoices. The lender provides a lump sum payment to the business, and the business then repays the loan as their customers pay their invoices.
According to Statista, the global invoice financing market is projected to reach $1 trillion by 2026, up from $580 billion in 2018. This highlights the growing popularity of this alternative lending option for businesses that require quick access to cash.
Payday Alternative Loans
Payday alternative loans (PALs) are a type of small, short-term loan that is offered by credit unions. PALs are designed to provide borrowers with a low-cost alternative to payday loans, which often have high-interest rates and fees.
According to the National Credit Union Administration (NCUA), credit unions provided over 900,000 PALs to borrowers in 2019, with an average loan amount of $346. This highlights the growing popularity of PALs as a safe and affordable alternative to traditional payday loans.
Personal Loans from Online Lenders
Online lenders provide personal loans that are typically unsecured, meaning that they don’t require collateral. These loans are often used to consolidate debt, pay for unexpected expenses, or make a large purchase.
According to Experian, the number of personal loans issued by online lenders has increased by 28% in the past year, with over $21 billion in funding provided to borrowers. This highlights the growing popularity of this alternative lending option, which provides consumers with a fast and convenient way to access cash.
As the lending landscape continues to evolve, it’s important for consumers to explore alternative lending options that may better suit their needs. By considering options such as crowdfunding, online pawnshops, microloans, and P2P lending, consumers can access fast cash without relying on traditional loans. The digital age has brought about a wealth of new lending options, and it’s up to consumers to explore these options and choose the one that is right for them.