Compare Personal Loans（3）
Good things to know
As you search for a personal loan, you’ll encounter plenty of financial terminology. Let’s cover a few of the most important terms so you feel comfortable moving forward:
· What makes a loan “secured” is when you back it up with some form of collateral, such as a home. This places less risk on the lending partner since if you default on your loan, they can claim the collateral.
· Unsecured personal loan: This type of personal loan is the most common and does not use any collateral. Since there is more risk to the lender, unsecured personal loans typically have higher interest rates than secured loans.
· Fixed rate: Most loans today are fixed rate, meaning the borrower can lock in their interest rate which will never change over the life of the loan.
· Variable rate: Unlike a fixed rate, a variable rate is an interest rate that can change depending on the market, making it harder to predict what your monthly payment will be.
· Cosigner: Adding a cosigner to your personal loan means having someone share the responsibility of the loan. If you do not qualify for a loan, having a cosigner with a better credit score or credit history can help get you approved or lock in a low interest personal loan.
· Marketplace lender: If you’re looking for quick personal loans, a marketplace lender offers a platform to compare multiple lenders within their network.
· Direct lender: This is a type of lender that provides personal loans directly to the borrower.
Comparing offers from multiple lending partners – which is right for you?
Now that you have a better understanding of the loan process and some common loan terms, you’re ready to determine if a lender is truly offering the best personal loans online.
When you’re comparing multiple loan offers from a variety of lenders, the first thing you’ll want to know is what your monthly payments will be. This is why it’s important to first figure out how much you can afford to pay each month. You can look at the terms and rates from the lenders you are comparing to see if you can afford the payments.
When you’re comparing lenders, you’ll want to pay attention to the APR. By law, all lenders must provide you with an APR, which will include any fees they have.
Keep in mind that rates and terms all depend on things like your credit score, credit history, debt-to-income ratio, and income. Some lenders are more favorable to those with great credit and will offer these individuals the best personal loan rates, while rejecting those with subpar credit scores. There are, however, plenty of lenders who cater to those with low credit scores and will offer reasonable rates. You just have to shop around.
Online-only lenders vs. traditional lenders
If this is your first time searching for a personal loan, you may only be familiar with loans directly from your brick-and-mortar bank or credit union. You might be less familiar with online-only lenders and what they can offer as well. We’ve compared them below.
Traditional lenders | Pros
l Safe and secure, less likely to be scams
l Larger banks often have brick and mortar where you can speak to someone in person
l You can qualify for a larger loan amount if you are already a customer
l Sometimes you can get a discounted interest rate with a bank if you are an existing customer with a good record.
Traditional lenders | Cons
l Stricter qualifications
l More limited when it comes to interest rates and terms
l The application, approval, and funding process can be slower than with online lenders
Online-only lenders | Pros
l Online lending partners often make the loan process quicker and easier
l Offer pre-qualification, which runs a soft credit check only
l You can quickly compare offers from various online lenders
l Less strict qualifications
l Easy personal loans to obtain compared to banks
l Offer small personal loans and large personal loans
Online-only lenders | Cons
l It’s recommended to check the credibility of the site and the level of security when sharing your personal information.
l If you are an existing customer of a bank or credit union, you might be able to get better terms.
l It’s harder to speak with someone in person. Communication is typically limited to online chat, phone, or email.
One of the biggest reasons why people defer from online lending services is the trust factor. With large banking companies or even local banks in your area, you can feel more assured since you can usually go into the physical branch and speak with someone. With online lenders, you should be extra diligent in your search and do proper research.
FAQs:
1. What can I use a personal loan for?
The beauty of a personal loan is that it can be used for virtually anything—medical expenses, a vacation, a major purchase, and so on. There typically aren’t any limits to what you can use it for.
2. Who qualifies for a personal loan?
It can be easier to qualify for a personal loan if it’s secured, but if you’re choosing an unsecured personal loan, lenders will determine your eligibility based on things like credit score, credit history, income, employment stability, and debt-to-income-ratio.
3. Will applying for a personal loan hurt my credit score?
When pre-qualifying for a personal loan, lenders conduct a soft credit check, which does not harm your score. Once you move forward with a specific lending partner, they will conduct a hard credit inquiry, which can affect your credit score.
4. What information will I need when I apply?
Lenders will ask for your bank information, contact information, bank statements, pay stubs, and a driver’s license when you apply.
5. How much am I able to borrow and for how long?
How much you can borrow and for how long depends on your financial profile as well as the lender. Some lenders will have a loan minimum and maximum when it comes to loan amount, and a repayment term range, such as 36-60 months.
