Cheaper loans take a little more finding

Before the current credit troubles took hold, anyone looking for a loan could quite easily find the cheapest deal within minutes using the internet. The market was very competitive and internet loan brokers had to price their plans fairly otherwise potential customers would be quickly lost as they found cheaper loans just a few clicks away.

A typical internet loan broker partners with a number of loan providing companies behind the scenes - they call these lending partners. The lenders tend to be specialist finance arrangers in that they track down and negotiate wholesale loans on the money markets and then pass that money on, through brokers, to consumers. The money they lend is arranged into different loan deals depending on the amounts required and the credit circumstances of the customer.

The people who are looking for larger amounts and have clean credit records qualify for low rate loans whereas those who have had credit problems in the past and perhaps only need a small amount of cash over a shorter time period, may be asked to pay a little more for their borrowing.

That may seem a little unfair but as far as a lender is concerned, tieing up money for longer periods of time gives them stability and lending to customers with clean credit histories reduces their risk.

In the loans market risk and the assessment of a customers likelihood to default on a loan repayment plan is very important. Low rate loans go only to low risk borrowers. Higher risk cases are charged more for their loans because they are in effect subsidising the non-repayments that are likely to occur within that part of the customer base.

As different lenders offer different loan deals at any one time, it makes sense to work with a loan broker who has multiple partnerships with lenders in place. That way a customer has a better chance of getting a range of loan offers and will be able to select the best (often the cheapest) loan from that range.

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