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Benefits and Disadvantages of Loan Comparison Sites

By: Garry Crystal - Updated: 18 Sep 2010 | comments*Discuss
 
Benefits Disadvantages Loan Comparison

Loan comparison sites have become a very useful tool when checking out the lowest interest rates. There are however some distinct benefits and disadvantages of loan comparison sites that should be considered.

What are Loan Comparison Sites?

Loan comparison sites have become very popular with borrowers that are looking to compare lenders when they are considering loans. Loan comparison sites can compare a vast number of lenders in order to supply reports on the lowest interest rates

Loan comparison sites have given consumers a wider range of choices and options, and easier research methods simply by using their computer. Not only that but it has also been claimed that comparison site have actually forced lenders to lower the price of their financial services. So all in all, good news for the consumer, or so it would seem. When comparing the actual benefits and disadvantages of loan comparison sites there have been some slightly worry claims reported by the media.

Disadvantages of Loan Comparison Sites

Loan comparison sites have been trying to clean up their act as reports abound regarding certain advertising claims. In many cases comparison site have been advertising that they compare hundreds of different financial institutions, such as lenders, when they have in fact only compared a handful. There have also been complaints from companies left off the comparison list that these websites are simply directing customers to financial services that are paying the comparison sites to name them as the best deals.

Another gripe that can be found with the comparison websites is their “today’s best buys” links. In a lot of cases these best buys were not actually the best buys that customers could find, but simply links to companies that had commercial agreements with the comparison websites. In other words the comparison websites are being paid to promote certain companies.

Comparison Websites and Dwindling Popularity

Although comparison websites are very popular as research methods a recent report has shown that almost one in three UK consumers no longer use comparison sites. This is no doubt down to the widely reported overstatement advertising used by comparison sites. But another worry aspect is that if companies are paying comparison site to promote their products that cost must be passed on somewhere; and in most cases it will be the customer.

Trusting the Comparison Websites

Considering the benefits and disadvantages of loan comparison sites may make consumers think twice before using them. Realistically these sites should only be used as a research tool and they should not be used on their own. Customers should use various comparison sites and check with individual lenders to get the absolute best deal that they can.

Tips When Using Loan Comparison Sites

Do not click on links such as “today’s best buys” or links that will take you directly to loan applications. Use comparison websites only as a research tool, and always ask for a loan quote in the first instance, do not apply until you have found the loan that is perfect for you.

Also remember that the rates quoted will be for borrowers with good credit records. There are a few comparison sites that now have tabs you can click on if you have a fair credit rating and a bad credit rating. Fair and bad credit ratings are virtually the same thing in lender’s eyes with regards to the interest rates they will offer. In most cases people with fair and bad credit ratings will be directed to the same lenders that offer loans with high interest rates to customers with poor credit ratings.

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