There are many good reasons to take out a personal loan. Unexpected expenses, paying off credit cards, and investing in your business are just a few. However, many people are so eager once they hear that their application was accepted, that they take the first offer they receive. This is like buying the first car you spot at a used car dealership. You might get a great deal or you might not. You are taking a big risk by not shopping around. How can you know what is out there if you don't even look? Before you sign any loan agreements, you need to take the time to research all your available options. There may be loan options out there you qualify for that you wouldn't have thought were possible.
1 Brick-N-Mortar Banks
There are a couple of good reasons to visit a branch office of Wells Fargo, TD Bank or another local bank and speak with a loan officer. The biggest reason is loan education. A good loan officer will explain to you how getting a personal loan works and give you an idea of what kind of loan terms you can expect. While every bank uses different lending criteria, many have enough common denominators to give you a ballpark idea. For example, if the loan officer pulls your credit reports and tells you that your scores are low, then you know that a traditional bank loan may not be your best option. If nothing else, sitting down with loan officers will give you the opportunity to ask questions and get answers. There is a definite advantage to having direct contact with a person you can call with questions.
2 Online Lenders
One great thing about applying for a loan online is that you fill out one application and websites like creditloan.com and lendingtree.com submit it to their partners. It is a very effective way of receiving offers from multiple lenders that you can compare at your leisure without listening to a sales pitch. Other websites like prosper.com work by matching borrowers with private investors. Although you still need to have a good credit score to meet the website's eligibility requirements, you may be able to get a better deal from a private investor than from a bank. All of the aforementioned websites are free to apply and offer a fairly quick application process. You can do much faster comparison-shopping online than in person. Just be careful not to overdo it and rack up too many score-damaging inquiries on your credit reports.
3 Interest Rates
Obviously, in most cases, you want to pay the lowest possible amount of interest. Depending on your credit scores, finding a good rate may be difficult. Personal loans are often unsecured and come with higher interest rates than secured loans. Although, you shouldn't throw in the towel and accept a high interest rate just because you don't think you can do any better elsewhere. As mentioned earlier, every lender use different criteria to determine loan eligibility and interest rates. Not all lenders will make a decision solely on your FICO scores. If you have medical bills, but a history of no late payments, many lenders may overlook this. Others may put a higher weight on your balance to limit ratio. If you have a good idea of what your credit report looks like, tell the lender up front to see what kind of interest they can offer you.
4 Loan Terms
Not all loans are created equal and a lower interest rate isn't always the sole indicator of good loan terms. People with bad credit as especially susceptible to being charged loan processing charges and other miscellaneous types of fees. Make sure you examine all the conditions of every loan offer you receive to be sure that you're comparing apples to apples. A one-year loan with a 10% interest rate and no fees is a better deal than an 18-month loan with a 9% interest rate that charges loan fees. If you are having trouble making a good comparison, use a total loan cost calculator to figure out the principle plus interest you will actually repay on the loan and then add in any additional fees. Do not take anything at face value, make sure the lenders specifies all the terms and conditions upfront.
5 Reputation Check
With any prospective lender, the first thing you should do is check their reputation with the Better Business Bureau. If they are not an accredited business, then that is the first sign that they may not be a trustworthy lender. When you find the company, read through their information to see if there are any complaints and how they were resolved. Every company has complaints once in a while, so the most important thing is how did they handle it? If you see a high number of unresolved complaints, then you should steer clear of that lender. Another good idea is to input the name of the company into various search engines and Google, Bing and Yahoo. Customer review sites often appear at the top of search engine result pages, so you can get firsthand accounts from the lender's customers about how well, or badly, their loan deal went.
Choosing the best lender for a personal loan really does require some time and effort. However, the alternative is going into debt and paying more than you have to because you didn't feel like doing your homework. Why repay a lender any more money than you have to? It's your money that you work hard for, so you really need to put the time into finding the most favorable loan terms that you can get. Not everyone gets a great personal loan deal, but your goal is to find the best offer that is available for you. You may even find that you qualify for a better loan deal than you thought you would. In the long run, the initial time you put into finding the right lender will make the entire loan process from applying to repayment go much smoother.