
How to avoid the most common mistake by borrowers when comparing loan options - rm2904
https://blog.stilt.co/the-most-common-mistake-borrowers-make-when-comparing-loan-options-1211be2c15aa
======
newscracker
TL;DR - don't read articles like these with convoluted examples comparing
different loan terms (tenures) from different lenders and assuming the APR
(annual percentage rate) is what matters.

I don't understand why someone who's interested in getting a lower outgo would
even conclude just based on the interest rate when the loan terms are
different with different lenders. The example given in this article is
somewhat convoluted because each lender's loan term is different from the
other, and that justifies the existence of this article. If the loan terms
were the same across lenders, then the lowest APR would be the winner, and
aspects like origination fee (included in the APR) wouldn't matter at all.

~~~
rm2904
I totally agree that IF the loan terms are same, then lowest APR would be the
winner.

Unfortunately, most people are not financially savvy and unable to make
logical financial choices even if they are well educated with good enough
incomes. Most of the financial education content emphasizes comparison based
on APR (which is correct) but they miss out the impact of loan term and
origination fee especially if someone prepays the loan. That's what the
article is trying to explain, if the loan terms are different, then don't just
make decisions based on APR thinking you'll prepay and save more money with
the lower APR loan. Perhaps, the article could've done a better job at
explaining the concept.

~~~
newscracker
Thanks for that explanation! I didn't think about prepayment when I wrote my
comment.

