Rate shopping is not an entirely new concept. Most of us are born shoppers and we know the process. However, the problem is we don’t implement it when we are shopping for personal loans. This blog is about how to do the rate shopping for getting cheap personal loans. We’ve listed a few things that you must know before you start your hunt. ⭐Interest Rates & APR ⭐Personal Loans
We can’t predict what’s around the corner. Whenever we are face to face with such uncertainties, we either rely on our savings or we go for a personal loan. And according to figures released by Lloyds Bank, 33% of Brits (adults) do not save their money regularly. To cope up with the unexpected, we borrow money. When we start our search for personal loans online, we tend to forget about a few things that we should look into. The major thing that we miss out on is – rate shopping. It is an extremely important segment of your entire shopping process that you shouldn’t miss at any cost.
Let us imagine that you went shopping with your best friend. You enter a store and liked something – if you are an impulse shopper, you will pick it up at the first go. But if you are a conscious shopper, you will look out for more varieties and of course, the price point. So, when you are shopping for a loan, how can you miss out on comparing them? Let us understand the rate shopping in details.
What is Rate Shopping?
Rate shopping is defined as the process of evaluating different interest rates and APR offered by various lenders. Different lenders will quote different interest rates for your personal loan application. Rate shopping allows you to choose the cheapest one that is available to you. This can save you a lot of time and money. In simple terms, you have to shop around and explore different APRs. Without shopping around, the possibility of you getting a cheap personal loan is less. As a borrower, you must understand the difference in the cost of the available products.
How Rate Shopping Impacts your Credit Score?
When you apply for different personal loans with different lenders, there is a chance that your credit score will be impacted. As multiple loan applications mean multiple credit checks. To understand how it will impact your relationship with credit score, let us delve deeper into it.
There are 2 types of credit check:
Hard Credit Check
When a lender pulls out your credit score, it leaves a footprint on it. It will knock off a few points from your score. Also, the lenders that you apply for in the future may see this.
Soft Credit Check
A soft credit check is a formal review of your credit report. Lenders may check your credit report without any impact on your score. That means with a soft credit check your credit score will be protected. There are a few lenders who perform a soft credit check to analyse your loan application.
Rather than applying to different lenders, you may apply to one credit broker. LoanTube has a pool of FCA authorised lenders who carry a soft credit check before giving their in-principle decision. You do not have to apply to multiple lenders. Your loan application will be forwarded to all the available lenders with a single application point. This is a great way to save your time, and of course, your score.
3 Tips for a Successful Rate Shopping
While shopping for rates, you have to keep your hard checks lower. Lesser the number of hard checks on your profile, better for your credit score. We’ve listed 3 top tips that will help you to shop right. It’s always better to keep a check of these factors that influence the overall borrowing cost.
#1 Do NOT Make Multiple Loan Applications
We’ve already explained how multiple applications ruin your score. Moreover, there is a chance that your future borrowing experience will also be impacted if you damage your score. You can apply for loans by keeping a safe timeframe for application. Apply for loans in a 14, 30, and 45 days window. Why? Because all the enquiries made within a particular timeframe will be counted as a single entity. This also depends on the scoring model that is used.
#2 Compare Apples to Apples
This is a common mistake that a lot of us end up committing. Whenever you are shopping for rates, remember to look beyond the interest rates. Go for Annual Percentage Rate (APR). An APR is the total cost of borrowing. It includes any fees and processing charge in the cost. However, an interest rate is an amount that you have to pay on the principal amount that you borrow. Do not compare interest rates to APR. Both of these terms are different. You can read more about the difference between APR and interest rate here.
#3 Stick to the Amount
Whenever you are applying for loans to different lenders, ensure that you are keeping the loan amount and term consistent. Different loan amounts and terms will get you different loan quotes. You will have a lot of trouble in comparing the options and choosing the right one. Therefore, decide the amount that you need to borrow before you start applying for loans.
How to Compare Different Personal Loans?
The key is to understand how to do it right. There are various factors that you must consider when comparing unsecured personal loans. If you do not do it right, there is a chance that you may not get your hands on the cheapest available option. Always remember to compare loans based on:
- Annual Percentage Rate (APR)
- Monthly Payment Amount
- Additional Fees
- Any Discounts
- Loan Repayment Period
All of this will take time. But do not rush to decide as “Haste makes waste”. You can compare personal loans with us in 3 super easy steps:
- Fill in our simple loan application form.
- Submit and wait for a couple of seconds.
- Select the offer.
Yes, we have made our loan comparison process easy, convenient and simple for our borrowers. You will find all the required details on your screen at one place. The best part is we will also show you the list of the lender(s) who will decline your loan application so that you do not waste your time by reapplying to them. Apart from that, you will also see the amount that you have to pay every month along with the total repayable amount.
Shopping for rates is one of the ways to avoid multiple hard credit checks on your profile. Find the best deal for yourself by comparing at least 5 lenders. Before taking out a loan, it’s important to ensure that how much amount you can afford to repay. Shortlist those lenders who offer a personalized “soft search” that will not harm your credit score.
Want to compare unsecured personal loan lenders? Start now.