Is it Good to Use a Comparison Website to Compare Interest Rates?

When we are looking or a loan it can be very daunting knowing which lender to choose. There are many ways to compare them and some are much more time consuming than others. It can be very tempting to use a comparison website because it is free and quick. However, it is worth understanding a bit more about why they may not be the best option and what options are available.

About comparison websites

A comparison website is set up by a company that wants to make money. They will choose a selection of lenders which could be pretty large in number and then they will allow people to put in details and find out which lender will give them the best deal. This service can be handy but many lenders do not realise that for every person that goes to a lender through their site and then signs up for a loan, they receive commission. This means that they will very often only have lenders that will pay them a good rate. Therefore, there may be better lenders out there who are more suitable for you and will be cheaper, but you will not see them in this particular comparison website. One way to get around this is to use more than one site and then you are more likely to see a bigger selection of lenders. However, they are likely to still only list ones that pay them well and so this could still not allow you to see the very cheapest one.

It is also worth being very careful with the way that these comparison sites compare loans. They may just look at the interest rate and not use the AER. The AER is an equivalent interest rate which takes into account any fees that you have to pay as well. This could be things like set-up or administration fees. These fees can be pretty varied between lenders and so it can be deceiving if you just take interest rates into account which do not include these fees. There are also additional fees charged if you do not make your repayments on time. Although you will hope that you will not be charged these fees, you will need to make sure that you are aware of how much they are and how different lenders compare.

Alternatives

Using an independent financial advisor can be a good alternative in some cases. They will look through a lot more lenders and they are not allowed to take commission which means that they will not be biased. However, you will have to pay them and so you will need to work out whether you think that they will be able to save you more money than you will be paying them. If you are taking on a very expensive loan, such as a mortgage then it could be worthwhile but for something like a payday loan then it is unlikely to be worth it.

Doing your own research is a possibility. There are lots of lenders though so it can get rather daunting. It can be wise to perhaps think about what type of loan you need first and what features you want from a lender which then might help you to whittle it down to less. You might want a lender that you know, that you have used before, that people speak highly of, that gets good reviews or has a good reputation. You may prefer to just choose the loan that is the cheapest.

What to do?

It can be tricky but you need to think about finding a method which works for you. Make sure that you are properly comparing loans and that all the information that you need to compare them properly is included. You may need to do a lot of research yourself in order to achieve this by looking on the lenders websites. Finding a website which is impartial that reviews and compared loans could be the best way to do this, but it is not always easy to find sites like this. Many of them will be biased and they may make commission in the same way as the comparison websites do. A site such as Money Saving Expert could help though as they will include all lenders even ones that do not pay commission and they have information about what the lender is like with regards to customer service as well which can be very helpful. It can also be good to speak to people you know about their experiences with lenders as they will be truthful and they will be able to highlight any positive or negative experiences that they have had which might influence your decision. Just make sure that you assign a lot of time to doing this and do not rush or else you may not end up with the best deal for you. It can feel like a hassle, but it could end up saving you a great deal of money and mean that you will end up borrowing from a company that treats you better as well.

Should I get a Credit Card with Zero Interest?

Sometimes it is possible to get a credit card with zero interest. This can be extremely tempting to get and it can be a really good thing for some people. However, there are advantages and disadvantages of using a card like this and it is good to be completely aware of these before you take one on.

Advantages of a zero-interest card

With most credit cards you will get a certain interest free period. This is between the time that you buy something using the card and the date that you have to clear the balance before any interest is charged. This period of time can be anything up to about six weeks. However, normally, if you do not repay the full balance you will then get charged interest and it can be at a pretty high rate. However, with a zero-interest card you will be able to only repay a minimum balance and you will not be charged interest on the remining one. This means that you will be able to buy what ever you wish and not have to repay more than just a small amount.

Many people can use these to their advantage. The money that they will have used to repay the card, they will put in a savings account. This money will gain interest and then when they do have to repay the card (as the interest free period will only last from 6 months to a few years) there will be the money available to repay it and they will have gained the interest on it in the meantime. There is obviously more to gain from this if interest rates are high.

Another way that they can be used is if you need to buy something the you cannot afford such as a new white good or car and you do not want to pay interest on it. If you use the credit card, then you can repay a bit each month, making sure that you repay the full balance before the zero-interest period is up. It can mean that you will be able to spread a cost and this can be extremely useful.

Disadvantages of a zero-interest card

Although the zero-interest card can be extremely useful, there are risks with using the card as well. It is worth finding out, to start with, when the zero interest period ends. Once this ends you will immediately have to start paying interest on any money that you owe. This interest could be dearer than you would pay on a standard credit card and even if it is not, it can still be pretty high as credit card charges usually are compared with some other loans. If you think that there is a risk that you will not be able to repay the full balance on the card before this date, then it is wise to consider whether you should even be taking out the card in the first place.

Some people also find credit very tempting. They see the money as theirs to spend and then do not really think about or plan how they are going to repay it. It is wise to think about whether this is what you are like and whether it is something that you are likely to do. You will need to be really honest with yourself here. You also need to think about whether you will be committed enough to put money aside each month to make sure that you will have enough to repay the card before the interest free period is up. Lastly, you will also need to make sure that you will have enough money available to you in order to do this. Think about how much you get paid and the other things that you have to pay for and whether there would be enough money left to put some aside to repay that credit card.

So, as you can see, although it seems like a really good idea to have a zero-interest card, you do need to be careful. You need to make sure that you can take advantage of it and that you do not get into trouble with it and end up paying out lots in interest. Many people do take out the cards and use them wisely and gain from them, but there are people that struggle with them. You do need to think about responsible you are with money and how tempted you get with overspending. It is hard to sometimes admit to yourself what you are like, but we are all different in our relationship with money and we need to make sure that we are honest and make decisions that will help us to keep on top of things. It is very hard not to be tempted to spend money, so many people struggle with it and this can be as much to do with our control as good marketing by companies trying to sell us things. Do not blame yourself, but just make sure you take care of yourself.