The online lending world is notorious for charging exorbitant interest rates and employing unethical lending practices. Every year, many related complaints are made to the Financial Ombudsman Service to seek redress.
Although lenders are obligated to calculate your affordability before approbation, experts enjoin that you must assess your repaying capacity as it is incumbent on you. On no account could a lender be forced to take the blame for your reckless financial comportment. Integrity and transparency are a must to remove the possibility of an error of judgment.
When borrowing money, the first thing you do to opt for the perfect lender is to look for private money lenders near me. You check a couple of search results and make a decision quickly. Research is the passport to a perfect lender. While registration itself testifies to ethical lending practices, it does not insinuate that the lender will charge affordable interest rates. Availability of lower interest rates depends on multiple factors one of which is your credit score.
Ways to choose an affordable lender
Here is how you should look for the best lender:
- Find a lender whose products suit your needs
While various direct lenders are out there, not all of them provide the same kinds of products. For instance, you must have come across many lenders accepting bad credit applications, but a few of them consent to lend more than £1,000. If you have to take out a loan for £2,000 with bad credit, you will have to confirm that the lender you are applying to has a provision to provide larger loans.
Applying to the wrong lender will result in the rejection of your application. Apart from that, your credit score will be hurt. Eventually, you will find it all the more challenging to qualify for lower interest rates down the road.
Visit the lender’s website to acquire relevant information. If landing pages do not answer your queries, you should contact your lender to receive all necessary details.
- Look for legitimacy, registration and security
Every lender should be registered with the Financial Conduct Authority (FCA). A lender selling financial products without any registration, which you could know on the FCA website, is a red flag. Experts recommend not taking out a loan from an unregistered lender as they charge outrageously high interest rates to make profits.
There is the likelihood that you will fall into an abyss of debt. Bear in mind that you cannot complain against an unregistered lender for practising underhand lending tactics, as it was your responsibility to check whether the lender was registered or not at the time of borrowing money.
Make sure that the lender you are borrowing from is completely honest and transparent about their deals. Although the exact interest rates cannot be disclosed, they must be able to reveal the minimum and maximum rates they impose.
Get a line on estimated rates by contacting the lender. If you are borrowing a large amount of money, make sure you obtain prequalifying letters from multiple lenders. It would help you know how much it will cost you. Remember that the actual rates are more than estimated rates as they are determined after a perusal of your credit report and income sources.
There are some lenders who make their decisions after a thorough evaluation of your credit report and financial condition, regardless of the type of loan you are applying for. These loans are more credible than those who simply make their decision based on the provided financial details.
Many small loan providers do not ask for a bank statement or pay slip. The details you provide in the application form serve as the basis for their decision-making. This is a wrong and risky practice. You should avoid borrowing money from such lenders. Fetch all these details by contacting the customer support team.
- Look for fees and annual percentage rates
While comparing deals from several lenders, you should focus on annual rates rather than interest rates. Many borrowers do not know the key difference between them. Interest rate defines the cost of borrowing, but it does not include fees and associated charges. Every lender, whether or not they reveal beforehand processing fees, upfront fees, exit fees and monthly fees. Names to address them could vary by lender. Annual rates reflect both interest rates and fees and therefore, you should focus on them when calculating the cost of borrowing.
Representative examples given on lenders’ websites are oftentimes misleading. Actual rates could be five times higher. For instance, annual rates for payday loans could be up to 1500%, while interest rates capped by the FCA are 292%. Regardless of the repayment term – whether it is 14 days or a full one year - the cost of the debt is always calculated based on the annual rates.
- Choose a lender providing exceptional services
It is vital that your lender resolves your queries and concerns. Make sure you choose a lender who has gained popularity to provide the best customer service. In order to calculate your lender’s reputation, you should check Google reviews.
Trustpilot is a website that provides authentic reviews from people. You could know whether the lender has been in good books of their previous borrowers. Social media sites also come in handy to know about the market reputation of the lender.
To wrap up
You should always try to choose a lender who is reputed, trustworthy and reliable. Finding such a lender is not arduous as it involves little research. You should borrow money from a lender who provides suitable products to your needs and who is registered and legitimate. Ethical lenders always adhere to the FCA guidelines to work in your interest. If there is any way to choose a perfect lender, it is only research and research.
