Many people will automatically think that the cost of the loan is the only thing to consider when you are choosing between them. However, there are many factors that should be considered for a variety of reasons.
Firstly, many people will just compare the interest rates of a loan. This may seem sensible and it is something hic is very important. However, there are other costs which you should look at too. There may be a setup cost, for example, or other administration charges. It is also important to consider any fees that could be charged. For example there will be fees if you are late on a payment or cannot make a full payment. These can vary a lot and it is worth checking these even if you think you will always be able to make the payments. You never know what will happen in the future and so you need to be aware of the consequences.
Besides from cost of the loan, there are other factors that you should consider. One of the most important of these is flexibility. You need to be aware of how flexible the loan is. This means that if you do struggle with meeting repayments, whether you will be able to skip a repayment, make smaller payments or come to some other arrangement with the lender to help you to manage better. This is likely to cost you but it could be more helpful than repossession to you. Therefore find out what your lender is likely to do in this situation and whether it sounds like a good solution to you.
Some people feel that the reputation of the lender is really important when choosing a loan. They feel that they would rather go with one that comes recommended as they will trust them to look after their customers better. If this is the case for you then it is important to read reviews of both the lender and the particular loan that you are thinking of taking out to find more out about what others think. You may also be wise to ask friends and family who they borrow form and whether they would recommend them. It is worth remembering though that a small lender who may not be well-known may look after their customers better because they are more valuable to them than a well-known name who already has a reputation so will not need to work so hard.
Customer service is something which is important to many people as well. If you have any sort of query or problem then you will need to get in touch with the lender for help. This can be easier with some lenders than others and it can be really important. It can be wise to telephone the customer services department and ask a few questions. This will enable you to find out what they are like. You can see how friendly they are, how knowledgeable and how quickly you can get through and get your questions answered. You may wish to read some reviews too and find out if other people have any comments about them. You should be able to find things online if you just put ‘customer service’ and the name of your potential lender.
For some borrowers ethics are also important. They want to use a lender that they feel invests their money in things which they agree with. Some lenders are very careful with where they invest, to make sure that they feel that they are only giving to companies that they feel are ethical. The main problem with choosing a lender like this is that they tend to be more expensive. Obviously how important this is to you will depend on your own ethics as well as whether you can afford to pay more for your loan.
Although cost is a huge factor when choosing a lender, it is really important to be aware of other things which are important as well. You need to be sure that you are borrowing from a lender that you can trust and that will be flexible if you need them to be. You want to feel assured that they will have a good customer service department that will be able to help you out if you need it.