Applying for a loan online – A Promise Broken
Applying for a loan online can be deceptively complicated. Many websites will entice their customers with marketing messages promising ‘Lowest Rates’ or ‘Guaranteed Acceptance’, in return for completing a short application form consisting of little more than contact details.
Unfortunately, in the majority of cases, the loan applicant is simply providing their personal details to a lead generation business which makes its money selling loan applications to one or more loan lenders or brokers, and cannot accurately suggest whether or not the applicant is eligible for the loan they applied for.
It is possible that the applicant might see an indicative table of loan results, again reiterating the enticingly low rates and universal acceptance of the original marketing message; however, in most cases, this will be merely a list of lenders’ lowest possible rates, rather than a properly underwritten representation of products specifically tailored to an individual applicant’s personal circumstances and credit profile.
There are clear reasons why this unfavourable (to the loan applicant!) situation persists:
- An applicant is more likely to offer their personal details to a website if they are promised an easy route to the funds they need and have been promised the lowest rate products in the first place. Xem Tai Day
- Accuracy can only be increased if the route to application includes a detailed credit reference check and these can only be accessed by actual lenders and brokers. Crucially, performing this search costs money each time a reference check is performed.
- Performing a credit reference check can have a negative impact on the applicant’s credit rating, especially if many are performed in a short period of time.
So, in short, the loan website is benefited by the applicant blindly filling in their contact details on the promise that they will be given access to the best rate and most inclusive products.
The applicant may then find that their contact details are sold to multiple lenders and brokers, many of which might offer unsuitable products or charge up front applications fees. Clearly this situation is to be avoided.
So what is the answer?
Recently, it has been made possible for loan applicants to see which products they qualify for in a controlled and safe online environment. This is due to an advance in credit reference technology called a ‘quotation search’ which, even when performed multiple times, does not have any effect on the applicant’s credit rating. There is still a cost for performing the search; however the applicant does not bear the brunt of this cost, the loan website does.
There are a growing number these risk-free loan websites online now and the prospective applicant would be well advised to spend their time completing an application with one of these sites, rather than one which may sell their data.