There are 500+ online lenders in the UK offering all types of online loans available today. Different lenders, however, offer different deals so, how do you determine the best deal for you when there are so many options? How do you compare online loans like a pro? To help you avoid wasting time and getting confused in the process, below is a guide that lets you know everything you need to know.
Consider the loan amount
How much money do you need? What is the money for? Is the amount justified? Do you intend to spend the money prudently? These are some of the questions you need to answer when you want to know how much you need to borrow. Because different online loan lenders specialise in lending different amounts, you shouldn’t have a problem finding the best lenders for a given amount after you have established how much you need. If you want to borrow say £1,000, you should compare lenders who lend within these limits.
Consider the loan term
Once you have an idea about how much you want to borrow, you need to proceed and determine how long you want to stay with the loan. It’s important to remember that the best loans are those you pay off as fast as possible because they tend to come with better terms (low interest). Once you determine a suitable loan term, you need to compare what different lenders are charging for your preferred loan term. You should obviously go with the lender that charges the best rate for your preferred term. The lender should also offer options for early repayment without fees.
This is another obvious consideration. You should compare the interest rate charged by different lenders before you decide to choose a particular lender. To be able to compare interest charges like a pro, you need to understand how online loans are priced. Online loans like payday loans are priced in APR or annual percentage rate. This pricing structure translates into very high costs if you are unable to pay the loan in time. This is the main reasons why payday loans are considered expensive.
After identifying the lenders that lend within your loan amount and term limits, you should narrow down to lenders that charge the lowest APR. You should, however, be wary of lenders that charge 0% APR since such lenders don’t offer interest free loans as they would want you to believe. The interest-free period is likely to be very short and therefore insignificant. Instead, go with lenders who charge a realistic APR within industry limits i.e. between 1270% and 1509%.
You also need to consider if the type of loan you are taking has variable interest i.e. the rate changes according to the Bank of England interest rate. In such a case, the APR may not matter much especially if you will be holding the loan when interest rates are changing. A short term loan may be ideal in such a case since you may not hold the loan long enough to be affected by interest rate changes. All in all, you choose lenders that charge low fixed rates.
A lender may charge the lowest APR but have additional fees i.e. early repayment fees, processing fees etc. In such cases, you need to assess whether the extra fees make the loan more expensive than loans with higher APRs.
Consider using loan comparison websites
There are obviously very many factors to consider when you want to compare online loans. If you don’t want to spend a lot of time and energy considering numerous variables and computing them manually, you are better off using comparison websites. There are very many comparison sites today comparing online loans from all the major UK online loan lenders. The best sites compare all possible variables from the loan amount to the credit history, interest, monthly repayments, early repayment, name it! They also give accurate information which can be easily verified by visiting respective websites.
In a nutshell, you need to compare many loan options and variables to be able to identify the best lender for you. Most online lenders are sneaky, so you need to do your investigations. The lender you choose should cater for the needs of borrowers like yourself i.e. people with the same credit score, preferred APR and loan amount as yours. The lender should also offer favourable terms i.e. you shouldn’t pay fees on early repayments. The lender also needs to be reputable (licensed/registered/authorised by the FCA).