Navigating the online loan market
The online loan market has escalated in the last 5 years, but many people still only get in touch with their own bank, when they consider taking a loan.
But is that really the smartest thing to do?
Your own bank is not always the cheapest
There is absolutely no guarantee that your own bank provides you with the cheapest loan.
A bank is, like any other company, always looking to make the most profit, so even though your own bank knows your economy well, that does not mean that they give you the best offer.
Combined with the latest year’s emergence of many new online banks, the competition on the loan market has resulted in these banks being able to challenge the more traditional banks.
So even though you are applying for the same amount in different banks, the price could be very different.
Therefore you should choose to use an online comparison service such as LendMe, if you consider applying for a loan or refinancing your existing.
Collect more offers to obtain the best price
When a price for the same loan amount can vary significantly, the best way to find the best price is to collect offers from different banks.
This sounds like a huge task if you are to contact every individual bank and go through their own application process.
However, there is the solution of using an online comparison service for loans, that makes this process very easy.
The largest one in Denmark is LendMe, where you can get offers from up to 15 banks with only filling out one application.
They can save you a lot of time, because it only takes a few minutes to fill out the application, and the banks on their platform usually answer within a couple of hours.
How to compare offers
When you get your loan offers there are three expenses you need to keep in mind. These are the interest rate, the set-up fee and the administrative fee.
When you look after the lowest interest rate, you should only compare it to the other offers you personally get.
It sounds obvious, but the bank makes you an offer based on how they assess your economy, so you can’t compare it with an interest rate that a family member or a friend has got.
Besides this there is the set-up fee that can either be a fixed amount no matter the amount or vary between 1 and 3 percent of your desired loan amount.
Lastly there is the administrative fee that typically is between 0 and 40 DKK every month. It may not sound like that much, but during the term of the loan it can make a difference.
All these expenses are covered by the annual percentage rate (APR) of the loan, that is a great way to compare your offers to find the cheapest.
However, the APR only makes sense if you compare loans with the same maturity.
LendMe makes it easy to compare the different expenses, so you end up with the cheapest loan.