In 2023, borrowers looking for personal loans have a variety of options to choose from, including online-based lending platforms, banks, and credit unions.
However, to determine the best personal loan for their needs, borrowers should take into account several factors, such as interest rates, fees, repayment terms, and lender reputation.
What to Consider
Different lenders have different borrower requirements and loan products, so it’s essential to find lenders that match your needs and credit profile. For example, some lenders are interested in making personal loans only to borrowers with top-tier credit scores, while others extend loans to customers with less-than-perfect credit.
It’s also important to consider the loan amounts offered by lenders and choose those that can meet the amount you need. Personal lenders typically publish their minimum and maximum loan amounts, so be sure to check those. For instance, if you need to borrow $50,000 for a home improvement project and a particular lender offers loans ranging from $5,000 to $40,000, you can eliminate it from your list.
Other features that you might want to consider include funding speed, banking relationships, and value-added services like direct payment to credit card companies. Some lenders can fund loans as soon as the same business day, while others may take a few days. If your bank offers personal loans, it’s a good place to start your search. Not only is it convenient to manage your bank accounts and loan in the same app, but many offer interest rate discounts for existing customers.
To find lenders that offer the features you want, take a look at our updated list of top personal lenders and read some of our reviews.
Comparing the True Cost of Borrowing
When comparing personal loans, it’s crucial to consider the true cost of borrowing, which includes fees like origination and prepayment fees. Some lenders charge origination fees up to 5% of the loan amount, so take this into account when comparing.
If you plan to pay back your loan faster than the agreed-upon term, make sure to check if prepayment penalties are charged by lenders before considering it. Comparing the true cost of borrowing can save you hundreds or even thousands of dollars over the life of your loan.
Shop Around and Compare Offers
One of the best features of the personal lending industry is that virtually all top companies allow borrowers to check their rates and loan term offers without affecting their credit score. Therefore, it’s important to get quotes from multiple personal lenders to compare loan terms and interest rates.
Loan terms can differ significantly between lenders, so taking the time to get personalized loan quotes can save you money in the long run. For instance, comparing two loan offers could save you over $500 in interest over the term of a 60-month loan.
Taking the Time to Research Pays Off
While it may take some time to shop around and compare all your personal loan options, it’s well worth the effort. Spending a few hours researching can save you a significant amount of money over the life of your loan.
Personal loans offer many options for borrowers, so it’s essential to shop around and compare loan terms and interest rates. It’s also important to take into account the true cost of borrowing, including fees like origination and prepayment fees. By considering all these factors and taking the time to research, borrowers can find the best personal loan for their needs and budget.
