Some of the most important things to consider when comparing loans include potential fees, loan terms, the annual percentage rate, and credit score requirements. It is beneficial to narrow down your choices to a handful of personal loan lenders that suit your needs and compare the relevant factors to help you choose a personal loan that meets your financial goals and suits your budget. This guide teaches borrowers how to compare loan offers and what to consider during loan comparisons.
What to Compare for Personal Loans
You may be able to find a personal loan that aligns with your needs by shopping around and comparing offers. Here are the top 10 best loan comparison considerations when weighing the pros and cons of the personal lenders that have caught your interest.
1. Annual Percentage Rate (APR)
The annual percentage rate (APR) is the interest rate you'll pay to borrow money. The higher your loan's APR, the higher the overall cost of the loan. It's important to look at this rate when comparing loans from different providers because it more accurately portrays the total borrowing cost.
2. Fixed vs. Variable Rates
While a fixed rate means that the interest rate won't change over time, a variable rate means the loan's interest rate may fluctuate over time. It may be preferable to opt for a personal loan with a fixed rate since it offers more stability — it's easier to manage payments when your monthly payments remain the same throughout the loan term.
While variable rates may be desirable when they include a lower initial rate, there is a chance that the interest rate may shoot up before you finish paying off your loan.
3. Credit Score Requirements
Your credit score is one of the most important factors to consider when applying for a personal loan. Higher credit scores can open up more favorable loan opportunities, such as lower interest rates. Check your credit score through your bank, credit card company, or another online source and then research the credit score requirements of different personal loan options. Consider emailing or calling the lender if their requirements aren't listed on their website.
You may need a credit score of 670 or higher for the best personal loan rates. Some loan providers consider more than just the credit score to determine your eligibility and help you improve your credit score when payments are made on time.
4. Fees
Review the fees you'll have to pay for each personal loan option. Types of loan fees that may be required include origination fees, prepayment penalties, late fees and returned payment fees. Depending on the lender and your credit score, you may have more or fewer fees.
It's important to understand these fees to ensure there are no surprises when you're expecting a specific amount of cash for your needs. Before committing, it may help to speak with the provider for details on their particular plan.
5. Loan Term and Amount
Examine how long your loan is and the amount you may receive. Personal loan terms typically range between five and 12 months, although some lenders offer longer repayment terms.
While a longer loan term means that your monthly payment is lower, you'll likely pay more overall due to time and interest. Still, this may be helpful for dedicating a smaller amount toward paying off the loan monthly. Otherwise, a shorter loan term may help you get out of debt faster and save money on interest in the long term, even though it includes higher monthly fees.
Personal loan amounts typically range from $1,000 to $50,000. Ensure your needed amount is within the loan amount requirements, and consider the time frame of the loan compared to your intended amount.
6. Requirements for Approval
Every lender has their own criteria for approval. Most consider credit score and income for your eligibility. Some can consider additional factors like education, job history, age, and citizenship. Research the specific requirements of each lender to help you narrow down a suitable choice.
7. Collateral
Collateral is a valuable asset you can offer to a bank as security for a loan. Loans with collateral are called secured personal loans and can be useful if your credit score or income would make it challenging to get a traditional or unsecured personal loan. If you are in this position, compare the perks of secured loans with unsecured loans.
For example, while a secured loan may allow you to receive lower interest rates, you need to ensure you avoid defaulting since this may cause you to lose your collateral. In contrast, an unsecured loan may require higher interest rates, but you won't risk losing any assets as collateral.
8. Co-Signers
Lenders that allow a co-borrower or co-signer can help you get a better interest rate and chance of approval, especially if you have a lower credit score. Your co-signer or co-borrower should have good credit, income, and the qualifications to meet approval requirements. These qualities may help you get better loan terms.
Still, given that this person will share responsibility with you for the loan, it may be best to ensure that you both can trust one another to make timely payments. If all lender options still only offer high interest rates, you might consider improving your credit score before applying for a personal loan again.
9. Decision and Funding Timeline
Get information on how long it takes to receive a decision on your application and when you'll receive your funds. This timeline can be crucial if you require the money soon. Some lenders may have efficient online personal loan solutions that only require verification after submitting your loan application and signing the loan agreement, meaning you can receive your funds as soon as the following business day.
10. Unique Features and Perks
Look for any special deals or features that lenders provide. Some could offer low-priced credit score monitoring and credit reports, online privacy protection services, or autopay discounts to lower borrowing costs. Others may provide unemployment protection for a small fee to protect your credit and suspend your payments if you become unemployed.
Consider a Personal Loan With Atlas Credit
In addition to comparing approval requirements, rates and funding timelines, it is equally beneficial to consider the customer service and experience by exploring online reviews to see how the customer experience is for current and past customers.
Atlas Credit is a personal loan provider that provides access to affordable credit for underserved customers. Our customer reviews showcase our competence and trustworthiness as a lender. We offer an easy online application process with basic approval requirements and a quick turnaround time. For a personal loan with Atlas Credit, fill out a loan form, or visit one of our numerous branch locations today.
