When it comes to money, especially loans, then it’s hard to not be a bit suspicious of what’s going on.
Everyone is trying to win you over and there is always someone who does.
I mean, you have to choose in the end, but which choice is the best? Well, a loan comparison site might seem like the best option, since you can see everything for yourself. But even they have secrets, so here are seven things that loan comparison sites don’t want you to know:
1. Selling their data
Possibly one of the least known facts about these comparison sites is that they don’t keep their data to themselves. They share it with various other lenders. This means that they share your information with other lenders. Information such as, what type of loans you compare, the interest rates you are interested in etc. This allows other lenders to contact you and make you a possible better offer. Their websites are diligently designed to partake in the constant competition between lenders. This method allows lenders to do:
- Save money whilst getting useful information
- Find information on the consumer's favourable loan
- List a range of products from different lenders
Thus, they get information about what you want and/or need and how to compete against other companies. A diligent tactic.
2. Comparing fruits with vegetables
Often, loan comparison sites don’t compare their actual offers with similar offers from other companies. This means that apples aren’t being compared to apples but rather something different, making it irrelevant. Your loan will very likely be calculated for you, and so will a different loan, from another company, or an average amount.
Of course, the comparison loan will also be fully calculated. The allows you to see both interest rates, the total amount due and the monthly amount. But, the original amount, might be different. You usually don’t notice this because you already know the amount you’ve chosen and will assume that the comparison has the same amounts.
3. Flexible interest rates
Loan comparison sites often have flexible interest rates. Although this sounds like a good idea, it often isn’t. Having a flexible interest rate means that the interest rate can go higher or lower at any time, meaning that the interest rate you have now might seem small, but it can become an even greater amount than what the comparison shows you will be starting with, making it a greater number than what you might currently have.
4. The average interest rate
Loan comparison can be a tricky thing to do and makes it easier for you to understand whatever is going on. And usually, the loan that you want to choose will be compared to the average loans.
This, however, has a few mathematical problems that the site does not want you to know:
- The average interest rate does not change on the site for many years. This is because companies compete, and their interest rates drop. The interest rate in Australia is currently a low record of 0.5% in March of 2020. This is a 4.28% difference, which in loans can be a lot.
- The average is not a total average. Calculating a total average is not a simple task. Since there are many different amounts, rules, calculations etc. for each company to decide on an interest rate, not to mention that some companies have flexible interest rates. Thus it is the likeliest that the average rate is only the average that each company works around themselves but never uses. Making the average true in theory, but not in practice.
- The average interest rate does not calculate an average total amount that will have to pay back, that is an entirely different sum.
- The average is unpredictable. This is because it begs the question. Is it the average of the previous year, month or years? Is it from their own company or different companies?
5. Inclinations & prejudice
It’s strange to think about, but it surely is true. Even companies have biases and a loan comparison site is no acceptation. If a company is biased it can be highly down-gradable and negative towards the company itself. Due to their approach. Thus, for a company to be biased it must be very diligent in how they do it, to remain discrete. Why are companies biased? There can be various reasons, but it's most probably the way the company benefits.
When these comparison sites are biased, they usually do provide real information and also true information. But the information itself, as real as it may be, is simply just too inaccurate to use or trust. Thus, for you, it doesn’t mean anything.
This might make you want to reconsider which comparison site is better to use. Who’s information is unbiased and accurate.
6. The site’s partnering
Most comparison sites do “dull” comparisons because the comparison that is being made is usually just made by the company that owns the site. This means that you are practically being shown how good it would be to use the company that provides the loan comparison, to make them your lender. You must be diligent when considering these sites. Who owns them, how many sponsors does the site have, how many advertisements. Do they consider the market as a whole or just products and lenders?
7. How the sites exist
A comparison site is not a lender itself. Meaning, it doesn’t make money. As it is a website, someone has to look after it, meaning some people are hired to take care of there sites. They make their money in two ways. One aforementioned way is that they sell their data to other companies, lenders and brokers. Companies are always on the lookout for information on consumers. Another way is that they get sponsored. Similar to the latter, this is where companies and sites will sponsor the loan comparison sites to ensure that they are the ones getting the information. This also allows for these companies to be listed on the loan comparison sites.
Some facts can be quite scary and others can make you see how to get around the corners. These 7 things loan comparison sites don’t want you to know is what should help you make a better choice in the future when comparing loans. Not only by being more diligent in your choice of loan comparison site but overall loan comparisons and a better loan of your choice as well. Even if that loan comes with a better company.