How to compare online loans without getting burned

Online lending has made borrowing faster than it has ever been. It has not made it easier to understand. Two loans advertised at the same rate can differ by a third in what you actually repay, and the difference is never in the headline.

Here is what to look at instead.

Read the total repayable, not the rate

The single most useful number on any loan page is the total amount repayable: the sum of every instalment plus every fee, from the day you borrow to the day you finish.

A rate tells you almost nothing on its own, because lenders quote rates over different periods. A loan at “3% per month” is not cheaper than one at “30% per year” — it is roughly a third more expensive. Where a market requires lenders to publish an annualised figure, use it, because it is the only number designed to be compared across products.

If a lender will not show you a total repayable before you apply, treat that as the answer to your question.

Count the fees that are not in the rate

Rates exclude a lot. The charges that most often appear elsewhere in the terms:

Origination or processing fee, deducted from the amount you receive. Borrow 1,000 with a 5% origination fee and 950 arrives, but you repay interest on the full 1,000.
Late payment fees, sometimes a flat charge and a penalty rate on top.
Early settlement fees, charged for paying off the loan ahead of schedule.
Insurance bundled with the loan, occasionally added by default rather than chosen.

Add these to the total repayable before you compare anything.

Check the licence before the price

In every market we cover, consumer lending requires authorisation from a financial regulator. Licensed lenders are subject to rate caps, collection-practice rules and a complaints process. Unlicensed ones are not, and price is not the main risk you are taking with them.

The check takes two minutes: find the licence number on the lender’s website, then look it up on the regulator’s public register. If the number is missing, does not appear on the register, or belongs to a different company name, stop there. A cheap loan from an unlicensed lender is not a cheap loan.

Watch the term, not just the instalment

Lengthening the term lowers the monthly payment and raises the total cost, often sharply. Comparison tools that sort by monthly instalment will therefore push you toward the most expensive loan on the list.

Fix the term first — the shortest one you can comfortably afford — and only then compare what different lenders charge over it. Comparing across different terms tells you nothing.

Four traps worth naming

The introductory rate. A promotional rate on the first loan is a marketing cost, not a saving, if the standard rate applies to every loan after it. Compare the standard rate.

Rollovers. Extending a short-term loan rather than repaying it is where affordable borrowing turns into a debt spiral. If you are looking at a product whose business model assumes rollovers, treat the advertised term as fiction.

Pre-ticked boxes. Add-on insurance and priority processing are sometimes selected by default. Read what you are agreeing to before the final screen.

Approval-rate advertising. “99% approval” describes the lender’s risk appetite, not your rate. High approval rates are usually priced for.

A short checklist

Before you accept any loan offer, confirm you can answer these:

What is the total amount repayable?
What fees sit outside the interest rate?
Is the lender on the regulator’s public register?
What happens if a payment is late?
What does it cost to settle early?

If a lender’s own website will not answer all five, you have learned enough about them to keep looking.

Borrowing costs money. Only borrow what you can repay, and check the terms on the lender’s own site — not on ours, and not on any comparison table, including this one.