In this article:
- Which lender should I choose?
- What are the important things to look out for?
- How do price comparison sites rank lenders?
- Can I trust online lenders?
- Are review sites useful as an indicator for how good a payday lender is?
Which lender should I choose?
We are lucky in the UK to have a very large market when it comes to payday loans and short term loans – there is an abundance of lenders to consider and this is great for the consumer, the bigger the market the more competition and this results in better rates for customers.
It can always be tempting to go straight to the biggest names you know – think Wonga or QuickQuid (when they were actually open) – they advertised on TV so were the first point of call for many people looking for a short term loan, yet they were in fact 2 of the most expensive lenders in the country.
The point here is that just because you know the name, doesn’t make it the best lender for you or your needs, there are a lot of things to consider. Let’s take a closer look at the kind of things you should be looking out for when it comes to picking the perfect payday lender for you.
What are the important things to look out for?
Generally when talking about high-cost credit, the most important factor should be the cost of the loan, however, this doesn’t give you the whole picture and in fact, just going on the cost of the loan may actually end up costing you more in some certain circumstances.
Do you know of the lender, have you heard of them? It’s always worth checking right here on allthelenders as we are one of the UK’s largest price comparison site for short term loans and only work with the best lenders in the industry, if they’re not in our price comparisons then you may wish to look at some of the lenders we do work with, they’ve all been fully vetted and have the proper authorisations.
Cost of the Loan
Very important, the overall cost of the loan should be made extremely clear to you from the offset and you must understand the cost of the credit. There is little sense in trying to understand the APR of a loan that is for just a few months, it will be artificially inflated and you will not be able to make any decisions based on this number alone – more on this below. Concentrate on the Total Cost of Credit and the Total Amount Repayable – of course, the cheaper the better!
Don’t just look at the APR
Apr for short term loans is largely a useless number, they are only useful for loans over more than 12 months. Given APR’s in this industry are often in the hundreds of percent, they are usually representative and do not reflect the actual cost of the loan. A far better way is looking at the actual numbers, the pounds and the pence, of how much the loan costs.
Fees and Penalties
Whilst in this day and age no lender should be charging you a fee to apply for a loan, it’s not beyond the realms of possibility. This is not the only charge to be aware of however, also consider charges like early repayment penalties, late payment fees and missed payment fees. If you take a loan from the cheapest lender and want to repay it early, if the lender has a charge for this (most don’t) it could cost you more than another lender who perhaps had a slightly higher cost loan but no early repayment penalties.
Look at what the lender offers, will they send you the money the same day? Do they offer you flexible repayment options and terms? Make sure the lender has everything that you want so you can manage your loan properly.
How do price comparison sites rank lenders?
There are two ways to rank lenders – by the cost of the loan or by who will pay the comparison site the most to be at the top of the results.
Here at allthelenders we list all of the lenders we work with by the cost of the loan only – we do not allow lenders to pay more to appear higher. We want our customers to get the best deal they can without worrying about us manipulating the search results for our own gain.
It is not uncommon for price comparison sites to have featured or sponsored results at the top of a results table but again this isn’t something we do. If a site does this, they should make it explicitly clear the way the table works and allow you the option of sorting the results to your preference.
Can I trust online lenders?
Generally speaking, yes you can. Since the FCA took control of the market in 2014 lenders now have to meet extremely high expectations and the FCA simply wouldn’t give a licence to any firm that it believes may not have the best intentions of its customers at its heart.
With regards to payday lenders and short term lenders they must, by law, show their products on an FCA authorised price comparison website like allthelenders. Lenders must provide a link to the comparison site from their site so the customer can compare loans – if you do not see a link to a price comparison site on a lender site, it could be a sign that they cannot be trusted.
Are review sites useful as an indicator for how good a payday lender is?
We believe that there may be some questions to be asked about the legitimacy of many online reviews and this is also true for reviews of short term lenders. Some lenders seem to have attracted tens of thousands of positive reviews however from our own experience, generally speaking, people that take out high-cost credit do so very reluctantly and as a last resort, it’s often usually done without anybody else knowing so it certainly seems unusual to us that people would be willing to leave a review.
With this in mind, it is probably a good idea to look for reviews but we would suggest not basing your decision solely on what you read there.