The Pros and Cons of 3 Popular Online Financial Services

The way you manage your money has changed drastically over the past decade. More people than ever before can now save, spend, and borrow online, using only the phone in their hand.

These digital financial services are convenient options in a fast-paced world when you need answers on the go, but they aren’t perfect. Here’s an honest look at the good and bad of the three services below.

1. Direct Lender Online Loans

What if you don’t have the money you need to take on unexpected expenses? Some people pull out their phones to research direct lender online loans.

An online direct loan comes from a singular financial institution, so you don’t have to coordinate with a network of lenders or brokers before you get your funds.

Since it’s an online option, you can fill out an application on a lender’s website via desktop or using your phone. If approved, direct lender online loans may help get the money you need for your latest emergency.

What Are the Pros of Direct Lender Online Loans?

• Direct point of contact with lenders to eliminate confusion.
• Large selection of loans, including installment loans and lines of credit.
• Quick application process because a direct lender doesn’t have to cooperate with another lender.

What Are the Cons of Direct Lender Online Loans?

• Cost of borrowing may depend on the financial institution, loan, and your financial profile.
• Requires secure and reliable access to the Internet.
• Lack of face-to-face interaction can be hard on some borrowers.

2. Buy Now, Pay Later Financing

An online loan is there to help with unexpected and urgent expenses you can’t ignore. But what about those purchases you don’t really need, but would love to make? A growing number of shoppers, particularly Gen Z consumers, are turning to Buy Now, Pay Later (BNPL) financing.

BNPL financing is a point-of-sales installment loan offered by some e-retailers, arranged through a FinTech service; it’s one of the payment options listed at checkout. If approved, you’ll agree to pay your shopping bill over several, smaller payments paid to the FinTech service that holds your BNPL financing.

What Are the Pros of BNPL Financing?

• Helps you get urgent items, even when your budget is tight.
• Splits your payments so you don’t have to drop a lump sum.
• Doesn’t usually apply rates and fees like most personal loans.

What Are the Cons of BNPL Financing?

• Your BNPL payments tie up your budget.
• Convinces you to purchase something when you can’t afford it upfront.
• Can lead you to overspend accidentally if you don’t budget for your payments.

3. Digital Payments

Yesterday’s wallet was filled with cash and cards, which were the only way to pay for items while out and about.

Now, you can arrive at a café or department store, scanning your phone screen at checkout. You can transfer money between accounts, pay off a bill, or send some cash to a friend with just a few taps of your screen.

What Are the Pros of Digital Payments?

• A mobile wallet contains a lot of different services.
• Uses less space than a physical wallet if it carries an equivalent number of accounts.
• Makes it easy to manage your finances with a tap of your screen.

What Are the Cons of Digital Payments?

• Not widely accepted by all retailers.
• Digital payments increase your chances of spending more than you can afford.
• Losing your phone may expose yourpersonal information.

Online Financial Services Have Two Sides

Like any financial option, online services come with a list of pros and cons. Refer to this guide to weigh them before you commit to using one.