Navigating the online loan market
The online loan market has intensified over the past 5 years, but many people still only contact their own bank when considering a loan.
But is it really the smartest thing to do?
Your own bank is not always the cheapest
There is absolutely no guarantee that your own bank will give you the cheapest loan.
A bank, like any other business, is always looking to make the most profit, so even if your own bank knows your economy well, that doesn’t mean they’re giving you the best deal.
Combined with the emergence in recent years of many new online banks, competition in the credit market has enabled these banks to compete with more traditional banks.
So, even if you ask for the same amount in different banks, the price can be very different.
Therefore, you should choose to use an online comparison service such as LendMe, if you are considering applying for a loan or refinancing your existing one.
Collect more offers to get the best price
When a price for the same loan amount can vary considerably, the best way to find the best price is to collect offers from different banks.
It seems like a huge task if you have to contact each bank and go through their own application process.
However, there is the solution of using an online loan comparison service, which makes this process very easy.
The biggest in Denmark is LendMe, where you can get offers from up to 15 banks with just one application.
They can save you a lot of time, as it only takes a few minutes to complete the application, and the banks on their platform usually respond within hours.
How to compare offers
When you receive your loan offer, there are three expenses to keep in mind. These are the interest rate, set-up fee and administrative fee.
When looking for the lowest interest rate, you should only compare it to other offers that you personally receive.
It sounds obvious, but the bank makes you an offer based on how they value your savings, so you can’t compare it with an interest rate that a family member or friend got.
On top of that, there is the setup fee which can either be a fixed amount, regardless of the amount, or vary between 1-3% of the desired loan amount.
Finally, there are the administrative costs which are usually between 0 and 40 DKK per month. It may not seem like much, but over the life of the loan it can make a difference.
All these expenses are covered by the annual percentage rate (APR) of the loan, it’s a great way to compare your offers to find the cheapest.
However, the APR only makes sense when comparing loans of the same maturity.
LendMe makes it easy to compare different expenses, so you end up with the cheapest loan.