What do online financing websites have to offer that traditional brick and mortar institutions do not? Above all, the answer seems to be an unprecedented amount of convenience. In close second is the fact that these cyber lenders really do offer better rates and, in time, these rates will only continue to get better. People searching for a loan, or simply information about one, also appreciate the high degree of anonymity that the Internet provides them.

A wise professor once stated that for anything to succeed on the Internet it must, above all else, provide some kind of convenience to its users. Well, if this is the case, the blossoming world of online finance certainly fits the bill. Websites like Lendingtree, Financecenter, Eloan, and others have taken everything that makes the common person hate asking for a loan and flipped it on its head. Most of all, they save a tremendous amount of time for potential borrowers. Not only in that they no longer have to make a physical trip to the bank or credit union but they can save themselves many trips to many banks. By applying for a loan at one finance website only one time, a borrower can receive as many as four loan offers. Whereas, in the real world, that same borrower would have to apply at four different banks to get those same four offers.

Not only will cyber borrowers be saving time but they will also be saving money. Financing online has allowed banks and credit unions to significantly reduce their operating costs. Specifically, lenders have begun to save bundles in marketing costs: online marketing is about $75 per qualified lead, compared to $350 using traditional methods (Potwora 1). Therefore, they have been able to lower the rates they charge on their loans and still increase their revenues. Doug Lebda, founder and CEO of Lendingtree Inc., agrees that this is the case:

You should be able to get a better price that way than you should any other way. Lenders should be making more money from it. I think we are starting to see the rise of that already.(Hewitt 2)

Nevertheless, there are several key issues ambitious online lenders will have to face if they want to continue to be successful. First of all, they will have to completely abandon the use of commissioned loan officers. They should be replaced with either salaried or hourly call center employees. Electronic lenders will also have to decide how far they want to take the application process while the prospective borrower is online. Should sites like Lendingtree and Iown offer mere prequalifications, as is the status quo, or should they endeavour to reach binding commitments? The latter of the two would logistically and technically be far more complicated but some companies are already tinkering with the possibility. Consequently, it probably will not be long before such an option becomes the standard.

One final amenity that online lenders can provide to curious borrowers is anonymity. People's appreciation of anonymity, however, will come at a price for cyber lenders: The biggest obstacles to online lending at present are the need for new lending regulations and the assurance of privacy (Orr 1). Many people are simply afraid of being declined in person. But the impersonal nature of the Internet and online banking helps the squeamish overcome their fear of rejection. Besides winning their confidence, Internet finance companies are also attracting window shoppers to their sites. That is, now that the ability to research loan possibilities is free, window shoppers are emerging at alarming rates. In fact, almost too alarming. The ease of getting loan quotes online has become so unbinding and simple that many window shoppers are merely doing their research online and then taking their best online offer from bank to bank until one of them can match it. This issue poses a major threat to both the brick and mortar and cyber lending institutions. Nevertheless, realizing the need to protect borrowers' identities, personal finance websites will have to ensure that security on their sites is top-notch.

Online personal finance websites truly provide extraordinary opportunities for borrowers and lenders alike. Never before in history has it been as easy to research financing information and even take out a loan. With these benefits, though, will come grave responsibilities. For Internet lending to stay, online security will have to be on red alert and legal battles will have to be fought until the entire process is streamlined.

Created byAnthony M. Hill