com·pare
/kəmˈper/
verb
- estimate, measure, or note the similarity or dissimilarity between.
synonyms: contrast, juxtapose, collate, differentiate.
We like to compare almost everything in our daily lives. Why? Because, as in the case of our finances, we would like to get the best possible deal. We like better! Why? Because better is simply, better. Especially when it comes to better loans through loan comparisons.
Firstly, let’s take a look at why Loan Comparisons are Important:
To get the best deal. The bigger the asset you want to attain or the costs you want to cover, the more important the comparison process. You will save thousands in the long run if you find the best deal.
Save money. Impulsively deciding on a loan could cost you thousands of Rands in interest and unnecessary fees, so we compare to get the most favourable rates and cost structures.
Get the best features. Besides finding a loan with the lowest total costs, perhaps one of the most important reasons to compare is to get a loan with the most beneficial features. These can include:
- Flexible repayment structures and;
- No early repayment penalties.
To avoid applying for the wrong loan. Choosing the wrong type of loan can be a detrimental mistake and you won’t be in your most profitable situation. This could cause you to default on your loan.
With this in mind, how do loan comparisons lower prices?
The South African NCR puts a cap on the interest rates that lenders can charge for various personal and short/long-term loans. But there’s also some other factors we can look at which includes economic principles in competitive industries to explain this phenomenon.
As firms enter a market in an industry, they increase the supply of the product available in the market. This drives the new firms to bring their prices down to entice consumers to purchase the additional supply, as all the firms in the industry are competing for the same customers. Customers are thus faced with a sea of choices and are able to search for the best deals. It is therefore wise for firms to adjust their prices closely to the market price, which is the point where the forces of supply and demand meet. Economics 101 you’d say. Simple enough.
Because financial lenders are many times the first to expose money to the economy, they are the instruments used to govern the money supply by setting interest rates on the money it lends to individuals and companies. We can say that consumer choice is one of the main determining factors in lenders setting their interest rates on personal and various other loans. This is why you will find many financial institutions in South Africa providing clients with loan comparison tools to effectively compare cost structures and fees of loans. Always ensure that you take it slow when comparing loans, so you can get the best deal possible to suit your specific needs. Feel free to make use of the Fincheck loan comparison page to help you on your loan finding journey!
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