Don’t apply for a personal loan from the first lender you see. If you have so-so credit you may feel that you have to accept any loan terms to get your hands on some cash. But whatever your credit score is it always pays to shop around and compare deals for personal loans. Here are five questions to ask when comparing loan deals.
- What is the annual percentage rate (APR)? Looking at the APR can help you size up different loan packages that may be quoted. The APR is the true cost of borrowing money and can include fees and other costs beyond interest charges. It’s important to understand what types of costs can factor into the APR.
- What types of fees are involved? You may have to pay fees for the application, credit check, loan origination or other charges. Make sure you get all this information upfront when comparing loan packages in order to make an informed decision about borrowing money.
- Is there a penalty for paying a personal loan off early? This is a particularly important question if you are using plan to use a loan to consolidate debt. Paying off a loan early can free up more of your income, but get all the facts about whether you’ll pay a penalty so you can factor that into a debt reduction strategy.
- How does your credit score affect loan quotes? Borrowers rarely receive the low interest rates quoted in ads unless they have excellent credit. Make sure you are getting the correct information that applies to your financial situation before deciding to go through with a loan.
- What type of customer service does a lender offer? Are you applying for an online loan where you never meet a representative of the lender face-to-face? Do you plan to set up meetings at different lenders so you can have a more personal interaction? If you’ve been a member of a local bank or credit union over the years, you may have built up some kind of relationship with employees, which might help when applying for a loan. Make sure you choose a lender that is compatible with your wants and needs.
Taking time to evaluate different lenders and loan packages will help you make the best decision about borrowing money. If several lenders refuse to loan you money or offer very high interest rates, you may need to put off borrowing money until you clean up your credit.
by Ethan Leak