What factors should you consider when comparing personal loans

Introduction

When looking for a personal loan, the most important factors to consider are the lender’s minimum creditworthiness criteria, annual interest rate, loan term, and potential loan fees. The specifics will always vary from lender to lender: some lenders may accept loan applications even with an average credit score, while others may reject them.

It is therefore essential to take the time to check out different lenders, even if you are in an emergency situation, because even though personal loans are a convenient way to finance almost any personal expense, they do come at a cost. With a little patience and effort, you will be able to find a lender that offers the best Personal Loan FeaturesIn this article, we will discuss the different factors that all potential borrowers should consider when looking for personal loans.

Factors to Consider When Purchasing a Personal Loan

Minimum credit score required

Sometimes our preferences take a back seat because lenders have strict criteria and if you don’t meet them, there’s nothing you can do about it. For example, some lenders will only accept loan applications from people with a credit score of at least 600, while others may allow you to borrow even if you have a credit score below 500. However, to get the most favorable terms, most lenders will expect you to have a credit score of 670 or higher.

Annual Percentage Rate (APR)

The APR is one of the most important factors to consider when comparing personal loans. The APR, or annual percentage rate, is the interest rate you’ll pay, including any fees the lender may charge. The higher the APR, the higher the overall cost of the loan.

Most personal loans have a repayment period of between two and five years. However, some lenders offer longer terms. For example, some lenders may offer you a repayment term of up to seven or even ten years. A longer repayment term would mean a lower monthly payment, but you will end up spending more overall since a longer term would mean a higher interest rate.

Similarly, a shorter repayment term will result in a higher monthly payment, but you will be able to pay off the debt sooner and save money on interest. Analyze your finances and needs to determine whether a shorter or longer repayment term would be better for you.

Most lenders charge additional fees that you should be aware of before applying for a loan. These include origination fees, prepayment penalties, dishonoured payment fees, and late fees, among others. Some lenders may not charge these fees, so it’s important to do your research before choosing a lender. Plus, if your credit score is really good, you may be able to negotiate with the lender to waive some of these fees.

If you are concerned about your poor credit score or lack of a steady monthly income, it may be a good idea to take out collateral to secure the loan. These types of loans are called secured personal loans. Collateral can be a property, a car, or any type of personal property that you own outright. But keep in mind that if you fail to repay the loan, the lender or bank will stop providing the collateral.

Processing time and procedure

Each lender will have different processing times and procedures to determine whether or not to approve your loan application. If you need the funds urgently, look for a lender that can process the application the same day. Some lenders offer a 24-hour processing time, which means that if your application is approved, you will receive the funds the next day. This factor can help you narrow down your options.

Conclusion

Before you start anything, it is important to consider your needs and financial situation. By writing down the amount you need, your monthly income and the portion of your income you can afford to give in repayment after your personal expenses, you will have a better idea of the terms that would suit you best. Once you have these points defined, you will be able to compare different lenders and find the one that suits you best.