Personal loans offer several benefits. They are relatively easy to get without any collateral. They have lower interest rates than most other types of loans. You can potentially receive the funds in as little as one business day. The funds are disbursed as a lump sum and you can use it for any purpose. Personal loans are the best way to get the funds you need when you need them, whether it’s for a planned big purchase or a surprise financial cost. The key is to find the best personal loan for your unique circumstances.
Where Is The Best Place To Get A Personal Loan?
There is no single place that’s best for every person looking for a personal loan. These loans are typically offered by banks, credit unions, and private lenders. Each of these lenders set its own eligibility requirements, interest rates, and other terms and conditions.
- The very first step in discovering the best personal loan for you is knowing exactly what you need. Give some serious thought to what it is you need before you even start looking for a lender.
- Figure out how much money you need to borrow – You want to make sure you’re not borrowing too little or too much.
- Check your credit score – Most lenders will have a credit score cut-off. If your score is below the lender’s cut-off, they will not approve your loan request.
- Calculate how much you can afford to repay every month – This will help you determine the loan term.
- Research some repayment terms with different lenders.
- Draw up your plan.
- With this, you have a guideline and a goal in mind when you begin the search.
9 Tips For Choosing The Best Personal Loan For You
Keep these tips in mind when looking for a personal loan that works for you:
1. Explore your borrowing options
Loan terms, interest rates, offers, options, and fees vary significantly among lenders. Each of these factors can impact the cost of the loan. They can even impact your ability to qualify for a loan. The very first step in your search for a personal loan is to explore your borrowing options.
This entails doing a general search for personal lenders and going to each lender’s website to research their loan offer. Start by going through each lender’s eligibility criteria. Do you meet the qualifications to apply for a loan from that lender? Shortlist only those lenders whose requirements you meet.
2. Compare loan amounts
Some lenders may set a fixed maximum and sometimes even minimum loan amount that they offer. Lenders very rarely approve loan applications that are beyond their lending limits. Shortlist lenders that offer a loan amount that meets your borrowing needs. Delete the others from your shortlist.
3. Consider your financial credentials
Some lenders work exclusively with borrowers who have excellent credit scores and high incomes. These lenders generally offer the most competitive interest rates. If you meet these lenders’ criteria, you’ll benefit from the best rates and loan terms.
Other lenders may be a little more flexible with regard to credit scores and income. Still, others, make it easy for even borrowers with low credit scores to get approved. Keep in mind, if you have a low score, taking a loan will come at a higher cost.
4. Compare interest rates
The interest rate is the percentage of principal charged for borrowing the money. When looking for any type of loan, you want to find one that has the lowest interest rate. Even a marginal increase in interest rate can make a substantial difference to the total cost of the loan.
Every lender will have their interest rate published on their website. Make a note of the published rate on each lender’s website but know that this only gives you a general idea of the lender’s rate. It may not be the rate that you pay.
Lenders generally publish their lowest interest rate but only those with excellent credit scores qualify for that rate. Your interest rate will depend on your credit score. To know your exact interest rate, you’ll have to obtain a prequalified offer.
5. Get prequalified offers from multiple lenders
While getting prequalified offers is easy, you must do it the right way. Here’s what you need to know about getting prequalified offers.
When you apply for a personal loan, it triggers a hard credit pull or hard credit check. This involves the lender requesting the credit bureau for your credit report to go through your credit history in detail. Every hard credit check pulls your credit score down by a few points. If you submit multiple applications, it will trigger multiple hard credit checks. This will do considerable damage to your credit score.
A pre-qualified offer is an estimated rate that you can obtain without impacting your credit score. You can use an online loan calculator and enter your credit score and the amount you want to borrow. This online tool will calculate your estimated interest rate for that lender. You want to identify the lender offering the lowest interest rate. The more quotes you get from various lenders, the better your chances of finding the least expensive borrowing option. Getting prequalified offers does not trigger a hard credit pull, so your credit score does not get affected.
6. Look at the big picture
The interest rate has the biggest impact on the total cost of a loan but it’s not the only factor. Lenders quote highly competitive interest rates to attract prospective borrowers. But when processing your loan, some lenders may add on origination fees and other administration fees. These fees are added to the principal amount and can increase the cost of the loan significantly.
Don’t make the mistake of applying for a loan with the lowest interest rate. Before you sign any agreement ask the lender if they charge application, origination, or any other fees. Also, find out about prepayment penalties. After finding out about the fees, redo your calculations. Does the loan still work out cheaper than your other options or does it work out more expensive?
7. Consider term length options
You know how much you want to borrow and how much you can afford to pay back every month. Use these numbers to determine your ideal loan term. Longer terms can increase the cost of the loan by a lot because more interest accrues over the longer term. Shorter terms could make the monthly payments unaffordable, putting you at risk of default, which has serious consequences.
Loan terms vary among lenders. Does your chosen lender offer a loan term that works for you? You must take some time to shop around and find a lender that offers loan terms that work for you.
8. Ask about discounts and perks
Most, not all, lenders offer a 0.25% rate reduction if you enroll in auto-pay. This is a program that transfers the monthly payment amounts directly from your bank account to the lender’s account. Enrolling in auto-pay reassures the lender that they will receive their payments on time. Lenders offer a rate discount in order to encourage borrowers to use this program. It may sound like a small amount but it could save you at least a few hundred dollars over the loan term.
Ask the lender if they offer any other perks. With high competition among lenders today, many do offer various perks to attract more borrowers.
9. Customer service
During the process of researching the best personal loan, you would have reached out to various lenders and asked them questions. Was it easy to reach the lender and did you get the answers to your questions? Were you satisfied or dissatisfied with your experience with the lender thus far? It’s so very important to only borrow from a lender who is not just easily accessible but also helpful. If things get difficult down the loan, you want to know that your lender will help you find a resolution that works for both of you.
Using these 9 tips to find the best personal loan may take some time but it is time well spent. They will help you zero in on a loan with the most competitive rate and a loan term that’s the best fit for your requirements.
You can compare your personalized rates with our lending partners and potentially lower your monthly student loan payments and save money.
Raptor Disclaimer: Not every loan lender is featured on our site, and we remind users that there are other opportunities available that we do not showcase. We encourage users to shop around to discover the choice that is best for them and maximize use of scholarships, grants, and federal aid options before resorting to loans.
Raptor may receive referral fees from featured lenders and marketplaces when a user selects a product from an advertiser or partner company on our site, though there is no additional cost to the user for selecting one of these loans. Some users may receive discounts when pursuing a loan through Raptor’s links.
The interest rates shown may or may not directly reflect the rates offered by these lenders and marketplaces, though we review the interest rate index weekly. Raptor uses information from the lenders and marketplaces and the information given from the user in regards to their interest in obtaining a loan. Loan information may be subject to change at any time. Although Raptor strives to provide the most accurate information available to the user, we assume no responsibility for typographical errors or missing information in the content provided.
Raptor is not a loan lender and does not assume responsibility for suggesting a loan to a user who may not be eligible for it. Rates, terms, conditions, eligibility, approval, and other considerations are the decisions of the lenders and may vary depending on which lender or marketplace the user selects. We urge users to carefully consider and review all loan options and terms before committing to taking out a loan. Above marks belong to their respective owners.
Prosper Disclaimer: For example, a three-year $10,000 personal loan would have an interest rate of 11.74% and a 5.00% origination fee for an annual percentage rate (APR) of 15.34% APR. You would receive $9,500 and make 36 scheduled monthly payments of $330.9. A five-year $10,000 personal loan would have an interest rate of 11.99% and a 5.00% origination fee with a 14.27% APR. You would receive $9,500 and make 60 scheduled monthly payments of $222.39. Origination fees vary between 2.41%-5%. Personal loan APRs through Prosper range from 7.95% to 35.99%, with the lowest rates for the most creditworthy borrowers.
Eligibility for personal loans up to $40,000 depends on the information provided by the applicant in the application form. Eligibility for personal loans is not guaranteed, and requires that a sufficient number of investors commit funds to your account and that you meet credit and other conditions. Refer to Borrower Registration Agreement for details and all terms and conditions. All personal loans made by WebBank, Member FDIC.
