A guide to shopping for Loans Online
More and more people are turning to online lenders for finance. But what are their advantages, and are online loans as trustworthy as we think?
Make sure you take advantage of the footprint free, soft search tool offered by Freedom Finance. This innovative service allows potential customers to enter their details just once, and in return be presented with actual quotes that have been tailored to the individual. The aim of this is to protect credit ratings by encouraging consumers to apply only to the loans for which they will be accepted.
1. Lower interest rates
Lenders who are based solely online promise to offer reduced interest rates on their loans. This, they say, enables them to offer the consumer better interest due to the money they save from reduced overheads. It must be said however, that some high street banks use this method in selling their own online loans, which usually have an equally low interest rate.
2. You can keep an eye on the balance
An advantage of an online loan is that it is easily accessible. The current balance can be easily checked and any changes to your details can be updated quickly and efficiently rather than having to visit a high street branch.
3. Competitive pricing
Due to the growing market for credit during the recession, more and more online lenders are appearing. This is great news for the consumer as these lenders must be competitive in their pricing to make them more appealing than their contemporaries.
4. Easily comparable
Many online comparison sites present tables displaying the most attractive rates from each lender. However, these rates are usually reserved for those with the best credit rating. In fact, lenders only have to sell their most attractive rates to 51% of their customers, which means that 49% will be rejected, and incur a detrimental mark on their credit file. The solution to this is to use ‘soft search’ tools offered by footprint free comparison site Freedom Finance. This allows potential borrowers to seek the most suitable loan based on their individual circumstances, giving an actual quote rather than an impersonal rate table. The aim of this is to reduce rejections, which are harmful to your credit file as no footprint is left until a formal application is made.
Your personal details can be inputted privately rather than having to discuss your circumstances in front of a room full of strangers at the bank. Also you may not feel comfortable divulging your personal circumstances to a bank manager, whereas the ‘faceless’ online lender takes away this problem.
Online loans are not the best option for everybody and some disadvantages are outlined below.
1. Difficulty in understanding online terms and conditions.
Some customers value the explanation that a face-to-face loan consultation can provide and feel more confident in what is expected of them in terms of repayment and changes in circumstances. Some people prefer to ask specific questions which may not be available online.
2. Online doesn’t give the opportunity to explain complicated finances.
Individuals who have complicated financial portfolios may feel more confident discussing these matters to a financial advisor or bank manager rather than trying to fit within the parameters laid out by online application forms.
3. Online advertised rates may be misleading
Online lenders will advertise their best possible interest rates to attract custom. However, only 51% of successful applicants need qualify so 49% may be charged higher than they originally thought, and so would need to search again. A face-to-face lender would give you the specific rate based on your circumstances so you wouldn’t feel you were missing out on a better deal.
4. Preferential rates may be offered from your existing bank
If you have been with the same bank for some time, it may be worth checking if you would qualify for preferential loan rates through being a loyal customer.