Important Terms to Know When Taking Out a Personal Loan
Prepayment Penalty – A prepayment penalty is a charge incurred on a loan that is paid off before its due date. Because an early payoff prevents the lender from making money from the interest assessed on the loan, this type of penalty is sometimes enforced.
Origination Fees – These fees usually represent a percentage of the total loan amount and are represented in the form of upfront charges. These amounts are assessed for processing the loan request.
APR – This is the interest rate assessed for the loan, including any fees. Therefore, you need to examine this percentage closely when comparing personal loan lenders.
Late Fees – Late fees represent charges you must pay if you miss a loan payment or your payment becomes past due. When comparing lenders, check out the late fees and review the grace period for making a payment on the financing.
Top Recommended Personal Loan Lenders
You can choose from several recommended personal loan lenders. Check out the top features of each lender to make a good decision.
Credible offers a best rate guarantee and a loan term of 24 to 84 months. Therefore, you may want to consider this lender if you want the best APR.
Best Egg – This lending provider is best suited for anyone seeking a fixed rate on their personal loan.
Lending Tree – Use the services of this peer-to-peer (P2P) lending source to make payments easier and approval hassle-free.
LoansUnder36 – This loan servicer is an ideal choice for anyone who has a lower credit score.
Upgrade – This loan connection service enables you to check your APR fast and proficiently – a no-hassle way to secure a loan at a reasonable APR.
Marcus by Goldman Sachs – This personal loan specialist offers simple loan processing without the regular fees
Your Credit Score Explained
Your FICO score or credit score will be used to determine the APR for your personal loan and the amount you will receive. Along with your debt-to-income ratio, your credit score will be the determinant for your loan terms and interest rate. The following information reviews the credit score ranges. If you have a higher credit score, it represents less risk to the lender, and therefore the APR is lower.
720 and up
Excellent Credit Score
690 to 719
Good Credit Score
630 to 689
Average credit score
Poor credit score
Loan Purpose and Amount
Loan Purpose and Amount A personal loan can be used for one of various reasons, as follows:
Weddings Some people take out personal loans to pay for a wedding. Because this is a once-in-a-lifetime event, it helps to have a way to pay for the celebration. An online unsecured personal loan often provides the solution. Before taking that decision, it is worth comparing between the best wedding loans for the event you have in mind.
Car, Motorcycle, or RV Financing If you are in the market for a car, motorcycle, or RV, a personal loan finance can help you get the type of transportation you desire. Plus, you can compare interest rates to see which of the best car loansAPRs works best with your budget.
Vacation Planning Have you always wanted to take a Caribbean holiday in the middle of winter? If so, you can do so by taking out a personal loan. Why should you freeze when you can enjoy a warm tropical breeze and sunny skies somewhere else? Whether you need a big or a small loan, make sure you review the best vacation loansbefore taking one.
Home Purchase and Improvement If you are spending most of your time at home, you might consider taking a personal loan to buy a house, or a piece of land. While looking for the best solution out there, whether it is for the best land loansor the best home improvement loans for your needs, use a loan calculator to see if you can pay off the personal loan.
Unexpected Expenses If your plumbing goes awry or your car breaks down, it helps to know you can take care of the problem immediately. Taking out a personal loan can be the answer in these situations.
Sometimes, a plumber can be the perfect solution. To be able to cover that, you may want tomake sure you get the best household expenses loan. In other cases, your house might be uninhabitable. Whether it’s by natural causes, fire or a flood, search for the best relocation loan lenders and compare if their terms are matching your financial needs.
In cases where you have a medical condition that requires an immediate treatment, and you do not have sufficient funds to cover it, getting thebest medical loanmight be the best solution for you.
Paying for a Major Purchase Are you in the market to buy a new appliance or similar upgrade? If so, taking out a personal loan can help you improve your lifestyle now. In case you are considering a big purchase, and you already have a credit card debt, you might look for the best credit card refinance loan terms before getting and see what will work best for you.
Loan Amount When you speak to a personal loan lender, he or she will need to know the loan amount and purpose for the loan. This is good to know, as it will help narrow your search. Because lenders feature minimum and maximum loan amounts that they are willing to lend, you will need to find a lender who can meet your terms for payout.
Learn the Repayment Terms
Personal loans come with set times to pay off a loan. Therefore, repayment terms may span from 12 months to 60 months or more. While longer terms will spread out the payments and lower the amount you pay monthly, you will also pay a higher amount of interest. Know your loan terms so you can make the best decision with respect to repayment.
Documents You Will Need to Get a Personal Loan
To obtain a personal loan, you will need the following documentation and information:
Government-issued I.D. (for proof of address and age)
Payment stubs from you last 2 most recent paychecks
Bank account information and bank statements
IRS W-2s for employment and income proof
Collateral (if the personal loan is a secured loan)
The lender needs the above information to verify your income, your age, and banking details.
Comparing Offers from Multiple Lenders – Which Is Right for You?
When comparing lenders, the first thing you need to do is compare the monthly payments. Ask yourself what you can afford. This will help you narrow your search. Review the terms and rates offered by the different lenders.
You also need to compare the APR. Legally, lenders must supply you with the APR, which includes the interest for the loan and any fees.
The rates and terms of personal loans depend on your credit score, credit history, debt-to-income ratio, and income. While some lenders tend to favor applicants with higher credit scores, other lenders will work with borrowers with subpar scores and still offer reasonable interest rates. You just need to compare and shop around.
FAQs on Comparing Personal Loans
What is needed for a personal loan?
You will need to provide a bank statement, bank account information, government-issued ID, and W2 tax forms. These documents are need to show proof of earnings, age, and residence.
What is the APR on a personal loan?
The APR is the interest charged on the financed amount. It may also include fees and other charges for processing the loan.
What is the average rate for a personal loan?
To determine the average amount for a personal loan, you have to determine the average amount for your credit score. If you have excellent credit (750 to 820), the average rate falls at 12% while the average rate for a good credit score (680 to 719) hovers around 14%. If your credit is fair (640 to 679), the average rate is around 18%. Poor credit scores (300 to 619) have average APRS of about 28%.
What should I consider when reviewing personal loan options?
When comparing personal loan vendors, look at the terms of the loans and the average monthly payment. Also, review the average APR for your credit score. Consider what the lender offers in a grace period and find out if the loan comes with a prepayment penalty.
Do all lenders provide loans for all purposes?
Most personal loan lenders will provide financing for just about any purpose. However, some lenders prefer to lend money for a specific reason. For example, some lending sources gear their loans to people who only wish to consolidate debt. However, in most instances, you can obtain a personal loan for almost any reason.
What affects personal loan approval?
When a lender assesses your requirements for a personal loan, he or she looks at your payment history, your utilization of credit, your debt-to-income ratio, your work history, your income, and how long you have lived at your place of residence. All these factors play a part in a personal loan approval.
What Is a credit score?
A credit score is a credit rating provided by the 3 main credit bureaus that reveals your ability to pay back a loan. Therefore, most of the credit rating, also called a FICO score, is based on your ability to pay and your debt-to-income ratio. Scores range from 300 to 850, and are categorized as Excellent, Good, Fair, and Poor. If you have a higher credit score, you will enjoy better terms and a lower interest rate on any financing you receive.
What Types of Personal Loans Exist?
Personal loans are represented by secured and unsecured financing. If a personal loan is secured, it means that you must provide a form of collateral to receive funding. Another name for this type of loan is a collateralized loan. Collateral may take the form of jewelry, art, or a type of vehicle (or title loan for a car).
Most personal loans featured online are unsecured or uncollateralized. Therefore, they come with a higher rate of interest. As a result, the APR is based on the credit rating of the borrower.
Can a personal loan be used for debt consolidation?
Yes, a personal loan can be used to consolidate credit card debt. This can be advantageous if the APR of the personal loan is less than the interest you are paying for your credit cards. Also, this type of loan makes it easy for you to pay off your credit cards and submit 1 easy payment each month. You can also use a debt resolution service, such as Freedom, to get rid of the debt you can no longer manage.
Can a personal loan be used for a student loan refinance?
No, not usually. A personal loan usually is not designed for this purpose. However, one popular personal loan provider, called Credible, will help you with refinancing a student loan or consolidating the debt at a lower APR. You can quickly fill out a form on the Credible site to see if you qualify.
Will applying for a personal loan hurt my credit score?
It does affect your credit score, but only slightly. When you apply for a personal loan, it triggers a hard credit check, which entails a more thorough assessment of your credit history. This inquiry slices about 5 points from your FICO score. All in all, any new credit application accounts for 10% of your credit rating.
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