The Lendela Lowdown
Why comparing loan rates just isn’t enough anymore: From the lack of transparency in the lending industry to the hit on one’s credit score, simply relying on comparing doesn’t cut it anymore.
Matching is the new comparing: Instead of simply comparing advertised rates that you don’t qualify for, all your personalised rates can now come straight to you without searching, by using a loan matching platform like Lendela.
Always demand transparency and accountability: You no longer have to settle for confusion, frustration, or disappointment in your loan journey — with loan matching, always get the answers you need to make an informed decision on your loan.
If we looked at the number of comparison sites out there today, you might assume that comparing our options before making any purchase is practically in the Singaporean DNA. From mobile plans and credit cards to personal loans and cars, chances are you’ll find a site that allows you to compare the options out there.
But is it really in our DNA? Despite the ubiquity of such platforms, some global studies have found that many consumers, from Singapore to the US and UK, do not compare loan rates due to a variety of reasons, from pessimistic beliefs about the costs and benefits of switching and a lack of transparency, to complexity in evaluating financial products.
As we will explain, these reasons are also why dozens of comparison sites later, Singaporeans are still not nearer to making an informed decision on their loans, and why the emergence of loan matching in Asia, particularly in Singapore, presents a unique solution to a longstanding problem.
The idea of comparing loan rates still makes sense
The same lecturer above also revealed that while turning to your current bank might seem easy, interest rates vary wildly and have huge potential impact on financial outcomes.
For example, a $10,000 deposit in 2019 could earn $163 more annually between the highest and the lowest rates. Similarly, mortgage loan rates also showed huge variation and potential savings of about $1,400 annually between the highest and the lowest rates (TODAY, 2019).
All this is to say that the wisdom of availing yourself of all options before making a financial decision is still the gold standard. However, the traditional way of comparing does come with severe limitations, as we’ll discuss below.
What’s broken about loan comparison?
Lack of transparency
While most borrowers recognise that comparing personal loan rates is an effective way to find their most competitive offer, which can often translate to thousands of dollars in savings on interest, the problem that exists in the lending industry today is that advertised rates on comparison sites are not your personalised rates.
Comparison sites primarily funnel borrowers to a loan provider’s site, and statistically, very few people will qualify for the advertised rates after applying. Furthermore, banks and providers do not typically provide reasons for rejection, offering a different rate, or offering a different loan amount, which often leaves borrowers high and dry.
This then leads most borrowers to apply across multiple banks and providers to “compare rates'', costing you huge amounts of time just to find your ideal loan. It’s not difficult to imagine why most Singaporeans eventually give up and stick to a single provider, unknowingly spending up to tens of thousands of dollars more on their loans.
Exposing your creditworthiness
What’s lesser known about this process, however, is that by applying across multiple providers to find your best rate, your credit score takes a hit since each loan application leaves a record on your credit report, sending a signal to banks that you might be a “financial risk”.
It is not uncommon for someone to apply for multiple loans to compare rates and eventually no longer qualify for one anymore.
Lack of dedicated help in evaluating options
Personal loans, like most financial products, can come with complex processes, endless fineprint, and a sea of jargon that nobody wishes upon even their worst enemies. What Lendela has realised after being in Singapore for over six years is that without personalised help, borrowers tend to get lost, feel overwhelmed, or become frustrated, ultimately settling for a loan option that doesn’t fit their unique situation. In most cases, these borrowers end up spending much more on borrowing costs, while others who give up along the process never get the funds they sorely needed.
What to look out for when borrowing in 2024
Ensure the loan fits into a broader strategy
Start by understanding how much you need and how much you can comfortably afford to repay each month. Just like most aspects of personal financial planning, an informed decision on loans is often part of a broader financial strategy where borrowers assess their income stability, existing financial obligations, and long-term financial goals before deciding.
Consider your regular expenses and how a loan fits into your life, so you never bite off more than you can chew.
Advertised rates are not personalised rates
It’s important to recognise that the advertised rates you see from most loan providers are not your personalised rates. Statistically, very few people will qualify for the “from” rates after applying, and your next loan is no different.
This is why it’s crucial for borrowers to always seek out their personalised rates, and one of the quickest ways to access multiple personalised rates is through Lendela. We’re Singapore’s only loan matching platform, and we automatically match you with personalised, pre-approved rates from over 40 banks and loan providers, in just one online application.
Always demand transparency and accountability
While transparency can be hard to come by in the financial services industry, when it comes to lending, borrowers should never settle. If you’re unsure about loan terms, uncertain about the process, or have questions about anything, understand that you deserve to be heard and that your questions should be addressed.
While technology may solve certain issues, nothing quite replaces the personalised service borrowers need when they want to clarify loan terms, financial jargon, or have questions unique to their circumstance. This is why Lendela dedicates large amounts of resources to ensure our customer care is always personalised, empathetic, and solutions-driven, and that borrowers’ needs are addressed no matter their financial literacy or loan size.
Matching is the new comparing
While most borrowers recognise that comparing loan rates is an effective way to save on borrowing costs, advertised loan rates you see everywhere are rarely the rate you qualify for.
This is why instead of simply comparing rates, using a loan matching platform such as Lendela is the safer and quicker way to find your ideal loan, period. By bringing the most competitive personalised rates to you, Lendela makes it cheaper, faster, and safer for you to borrow, and this becomes especially crucial in times of urgent need.
