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.
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.