There’s no doubt about it; unsecured credit has changed since the Great Recession, thanks to the development of innovative new products and the extension of loans to those with poor credit histories.
With this in mind, it’s little wonder that we’ve seen the rate of borrowing increase incrementally during the same period, with credit card lending growing faster than any other type of loan. Over the course of the last six months, the Bank of England (BoE) has reported that this metric rose by 9.5%, while there is no sign of it abating any time soon.
While accessing a line of credit may be easier than ever, however, this creates significant challenges when attempting to choose a reputable lender and one that is suitable for your needs. In this post, we’ll consider five things when choosing a lender and ask why they’re important.
1. How Credible is the Lender?
Let’s start with the most important metric, as you must always verify that a potential lender is fully accredited within the field and boasts the required degree of credibility.
There are several ways in which you can distinguish between credible and questionable lenders, with one of the first being that they are authorised and regulated by the FCA. You can check here if the companies you are considering are legitimate.
Similarly, credible lenders should always have a track record of satisfying their customers, so be sure to check out any independent reviews published on Google and verify the brand’s rating on sites such as Trustpilot.
2. What Interest Rates do the Firm Apply?
In practical terms, your first port of call when appraising potential lenders should always be the APR applied to their products.
This essentially refers to the interest rate repayable on the loan, and this should be considered as the total cost of borrowing money.
If you’re to achieve genuine value for money, you should always compare the market to determine the best real-time offers. Note that unsecured products tend to be subjected to marginally higher interest rates in order to offset the greater risk to lenders.
3. Is there Payment Flexibility?
Ultimately, all lenders will provide their customers with a detailed repayment plan, which takes into account the amount borrowed and the associated interest rate.
However, some lenders will offer a certain degree of flexibility in some instances, particularly if you alert them to an unexpected change in your circumstances that has impacted on your short-term ability to make a repayment.
In contrast, others will apply stringent late fees and missed payment charges, so it’s important to understand this before settling on your lender of choice.
4. Does the Brand have a Good Response Time?
Customer service is an increasingly important consideration in the digital age, particularly with so many loans and financial services now delivered online.
With this in mind, you’ll need to prioritise lenders that have placed an emphasis on their customer service delivery and respond quickly to specific concerns or queries.
Whether you need to alert the lender to a change in your address or discuss any issues that you’re having with regards to repayment, it’s imperative that you work with companies that respond in a proactive manner.
This can also mean that your original loan application is processed quicker, meaning that the funds land in your account when you need them.
5. Is your Loan Supported by Good Documentation?
Of course, one of the perceived advantages of applying for a loan online is that this eradicates the amount of paperwork and documentation required.
However, reputable online loans should be supported by clear and concise legal documentation that outlines your responsibilities and rights as a consumer.
This also lays out the lenders’ duty to you as their customer, ensuring that they can be held accountable in the event of any potential dispute.