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Looking for a loan sounds superficially simple, but since you need to compare lenders to get a good deal, it quickly descends into indecipherable complexity.
That said, this process is much easier to manage if you’re equipped with the knowledge needed to compare competing lenders, so here’s a look at what to keep in mind in this context, delivering the best results for your needs.
Assessing Basic Points for Lender Comparison
When choosing a lender, knowing what to look for is invaluable. You need to understand the various aspects by which lenders can be compared in order to make an informed decision. The three main elements to weigh up are:
- Interest Rates: Lower rates will save you money over time.
- Fees: Some lenders charge higher fees than others, whether upfront or hidden in the small print and related to a specific action you take, such as early repayment.
- Repayment Terms: The length and flexibility of repayment terms should also factor into your decision.
Lenders differ greatly in these areas, meaning that no two offers are precisely alike. Thoroughly understanding these basic comparison points allows you to find a lender that best suits your unique financial situation. And of course it pays to take your time with this process, making careful consideration of all your options before settling on any single loan product.
Leveraging Online Reviews Effectively
Another step to take before picking a particular lender is to read through various online reviews about them. These are typically written by real people who have dealt with these lenders and can thus provide meaningful insights. Here are some key points to look for:
- Testimonials: Look for recurring themes in customer testimonials, as they’re helpful indicators of common experiences, whether positive or negative.
- Customer Service Quality: Gauge how well the lender treats its customers. For instance, this GreenState Credit Union review covers the quality of the customer service, as well as the reputation of the lender.
- Problem Solving Skills: Understand how an organization handles tricky scenarios.
- Strengths And Weaknesses: Reviews worth paying attention to will highlight both the good and bad aspects of a lender. If the feedback is only full of praise or scorn, then it might not be giving you the full picture.
As part of this process, keep in mind that every company will have some negative reviews. What really matters is whether there is a pattern to these, or regular mentions of specific issues.
Evaluating Your Financial Requirements
Before you rush into comparing lenders, it’s crucial to have a clear understanding of your financial needs. This step will help you determine what specific factors are most important in choosing a lender. Consider these points:
- Loan Purpose: Why do you need the loan? Different lenders specialize in different types of loans, so whether you’re borrowing to grow your business or pay for a personal project, this will influence your options.
- Loan Amount: Calculate how much money you actually require. Some lenders might not approve large or very small amounts.
- Repayment Capability: Ascertain your ability to pay back the loan by analyzing your income and expenses. In the case of a business loan, expected revenue projections and cash flow have to be weighed up in this context.
- Credit Score: You need to know your credit status, since it can affect the terms lenders offer, and might mean that you’re not eligible to borrow from certain providers regardless of the terms.
Taking time to evaluate these financial aspects helps fine-tune subsequent comparisons. It allows you to carry out more focused research, and results in a choice that best compliments your needs and means.
Investigating Interest Rates
We touched on interest rates earlier, but they deserve a deeper discussion, since they greatly influence the total cost of your loan and your monthly repayments. Here are some of the key points to remember when looking into loan packages from rival providers:
- APY vs APR: The Annual Percentage Rate (APR) refers to the annual rate charged for borrowing and includes fees or additional costs associated with the transaction. It’s essentially the ‘base cost’ of your loan. On the other hand, Annual Percentage Yield (APY) takes into account both interest rates and compounding periods, meaning it reflects how much you’ll earn or owe in a year, including compounded interest. In simpler terms, APY can show you how often an investment compounds over a year giving you a better idea of its profitability if investing, or the cumulative cost in the case of borrowing.
- Fixed vs Variable: With fixed rates, you’ll know exactly what your payments will be, while variable rates can fluctuate over time.
- Comparison Rates: This rate includes both the loan’s interest rate and most fees, providing a more accurate picture of cost.
Even a small variance in interest rates can make a significant difference to the affordability of a loan over the course of the repayment period. As such, comparing these aspects maximizes your potential savings and helps avoid any unpleasant surprises down the line.
Comparing loans isn’t rocket science, but neither is it something to take lightly. Research every aspect as much as you can, basing your decisions on your needs, and using reviews to your advantage, to benefit optimally in the long term.