Think you found a cheaper loan? Think again.

No one likes to be compared and probably will not be making it easy for you to do so.?FindTheLoan is here to change that.?When using us, you will notice on your dashboard all their offers are in the same terms or jargon so that it is easy for you to compare apple to apple. And when it comes to comparing loans, there is?more than just going for the cheapest interest rate you see.?Here are a few other factors that you may want to take into consideration, which will be clearly indicated on your dashboard.?

Fees

Take for example, 2 loans both with a quantum of $10,000 and 1 year in tenure, with the 1st loan at 11% p.a per year without any fees, while the 2nd has a lower interest of 10% p.a, but with an additional of one-time processing fee of $1,000 and 1% annual fee. The total fees of $1,000 and $100 make it slightly more expensive than the 1st, despite a lower interest rate - with an Effective Interest Rate (EIR) of 21% as you will pay a total of $2,100 in interest and fees.

There are times a lender may split the fees just to make it harder for you to compare. For one-time fees, they usually call it processing, faculty, set up or admin fee and for usage, they use terms like drawdown, usage, and advance fee. This is the reason that you will notice that our articles are written, as much as possible, with as many of the other names of the same loan type and terms that might be used, through our careful research (take for example there are 5 different names for gear up loan in another of our article under our Glossary page). In fact, it has become such a nightmare that at times even an experienced relationship manager joining another bank or lender might become confused.

Interest calculation method

Flat, compounding or reducing interest can drastically change how much interest you are actually paying especially for a loan with a long period. For example, a $100,000 (P) loan at 3% p.a (I) with just a 5 years (n) tenure calculated using the 3 methods can cause you to pay more than double the interest amount if not careful:

Flat/Simple

Compounding

Reducing

Interest is 3% x 5 years x $100,000 =?$15,000

Interest is P [(1 + i)n – 1] or?$15,927.41

Interest x the reducing principal as it gets paid off each month (and times not the full $100,000) and works out to be?$7,820

On your dashboard, we will?convert?any reducing interest to flat so that it is easier for you to compare apple to apple.?Simple interest is used on your dashboard?instead of reducing?as most banks and lenders communicate in simple interest plus it is also easier to calculate the total interest, even though it may appear more expensive. However, please note on the actual term sheet/loan agreement, if they are used to communicating in reducing interest instead, they may revert to that. Your total interest should remain the same as it is simply their preferred method of communicating interest rates internally or externally or if required by law. You can also double-check the amounts again by using our calculator. Block period

Take for example a 45 days loan; a lender may calculate it as 45 days, 7 weeks or 2 months. A $100,000 invoice financing at 3% per month interest will work out to be $4,500 for one with interest calculated daily or $6,000 for another calculating it as 2 months - 33% more for the 2nd even though both on paper state the same 3% per month. For short term loans that are measured by days than months or years, this is another way lenders make it hard for you to compare apple to apple.

Repayment term and lock-in period

For example, if you expect cashflow to be tight over the next few months but expect completion of a large order or a sale of a property later which will allow you to easily repay your loan, an interest servicing repayment means you only have to service your interest monthly, making your initial monthly repayment much more affordable. However, if you have a long lock-in period when your cash flow is freed up, you will pay an early repayment fee to discontinue the loan. (To find out more on the various repayment term types, please refer to another article of ours.)?If you are getting a property loan, having a long lock-in period may mean if you believe the interest rate will be trending downward, you might not be able to take advantage of that and refinance your loan to a new lender without paying a penalty.

Some lenders make it hard for you to compare the early repayment fee between loans by having a 2-tier early repayment fee calling the 1st one, for example, the more familiar “Early Repayment Fee payable within 6 months at 10% of principal sum “ which you will then tend to focus on – and may overlook later on the page, for example, a, “Early Redemption Fee payable after 6 months but within 2 years at? 5%”

As most lenders only have a single lock-in period, for simplicity your dashboard’s lock-in refers to the final period free of any penalty whereas secondary ones, they would state in under the terms and condition column Tenure

Naturally, the duration of the loan is another important factor. The same quantum divided over a long period means smaller monthly instalments and easier for the business to cope with, with the trade-off being more interest paid. Note for overdrafts and for loans such as Merchant Cash Advance, where there may not be a fixed tenure especially if it is on a revenue-based repayment model - the Financing Partner may not enter a tenure.

In summary

The above factors will be clearly indicated on your dashboard, using the same jargon and product names, regardless of what a lender calls them, allowing you to easily compare and Find The most suitable Loan for you. You can also consider using our loan comparison calculator, to compare 2 loans, side-by-side. Check out our glossary?if you would like to go into greater detail for any of the terms above.

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