There are many payday lenders and so it can be quite confusing to work out which one would have the best interest rate. You may be tempted to use a comparison website or review sites to compare them which can make the task quicker, but there are things that you should watch out for and be aware of.
Problems with comparison websites
Comparison websites do make things a lot easier. You can easily see which of the lenders has the lowest rate and so you do not have to do any more comparisons. However, you need to be very careful. It is worth understanding that those people that have comparison websites get paid commission on leads that they get from people clicking through their site and buying a loan. This means that they are likely to only list lenders that pay good rates of commission. You may find that different comparison sites have different lenders and so you could look at a selection of them to get a more balanced view. However, if there are any lenders that offer very poor commission then they are never likely to appear and you could end up missing out on a good lender because it does not appear.
Problems with review sites
Review sites can work in a similar way where the site will get commission on leads and so are likely to give those lenders a better review. There can also be other bias, perhaps if the site has actually been set up by a lender so that they can make their product look good. Alternatively, the reviews might be written by lenders where they might leave their products a good review and others a bad review. You will also find that if people leave a review it will tend to be a bad one. This is because they will not really be motivated to write a review if things have been okay but if they have had a poor experience then their strong feelings are more likely to result in them writing a review.
Problems with comparing interest rates
It is worth also being very careful when comparing interest rates. With a payday loan, you will be charged interest and fees on the loan and therefore if you are just comparing the interest rate then you might not be making the best choice. If you compare the AER this is an interest rate which incorporates fees as well and so this will be the best way to compare. However, comparing a percentage can be rather confusing and it can be far better to actually work out how much the loan will cost in monetary terms. This will allow you to more easily see how much you will be paying for it and you will then be able to decide whether you think that it is worth it. To find this out you should be able to use a calculator on the lender’s website. When you enter how much you want to borrow and how long for, it will let you know how much you will have to repay overall. This will allow to work out the cost. Once you know the cost you will not only be able to compare lenders but you will be able to decide whether you think that the cost of the loan is worth it considering what it is that you are buying with it.
Other things to consider
It is also worth considering that it is not just the cost of the loan that you should think about when you are choosing one. It is really important, for example, to make sure that you will be able to afford the repayment. It is worth spending some time looking at your finances and thinking about how you will manage to repay the loan. As you know how much you will have to repay, this should help you. It may be that you will have to reduce how much money you are spending in order to have enough left to repay the loan. Also make sure that you consider how you will manage to pay for everything else that you need and how you will cope after spending this chunk of money and whether you will be able to afford what you need. If you feel that you will really struggle to repay or that you just will not be able to then you should not get the loan out. You really need to be able to repay it or else there are additional charges that can be really expensive. You can then end up in more financial difficulty than you were before you got the loan.
You might also want to find out more about the lender and see what they are like and whether you feel that you can trust them. You might want to ask people you know if they have had any experience of payday lenders and whether they can recommend any. They might be able to tell you about their experience. If they say they would or would not recommend a lender then try to find out why and think about whether this would be important to you. You may also want to look at their website in some detail and contacting their customer services should give you enough information to make up your mind.