Find the Best Personal Loan for Your Needs
If you're in the market for a new personal loan, you're probably looking at a variety of different lenders. With so many options, it's hard to choose which loan is best for you and your family. If you want to ensure that you don't waste money on your next loan, it's critical that you shop around for the best interest rates. This will dictate how much money you end up paying back to your lender.
Many people make the mistake of taking the first loan they see – if you're desperate for cash, it may be easy to choose the first loan you see. Don't be naïve – there are plenty of great lenders on the market to choose from. Doing brief research on your available interest rates can save you hundreds, if not thousands, of dollars in the long-run.
In this article, we'll take a look at personal loan interest rates comparison to help you better assess the personal loans you're currently considering. You can use these comparisons for both personal bank loan comparisons and low interest personal loans comparisons. By using the information in this article, you should be able to take steps to ensure you get a better financing deal. Check it out!
What to Look For When Doing Personal Loan Interest Rate Comparison
The Importance of Interest
Interest rates typically come up as small numbers in the fine print of personal loan applications. Lenders don't want you to know the interest rates they're offering, and they don't want you to put too much thought into how much it will cost you over the term of your loan. But interest rates are often the most important form of any financing. They change the viability and affordability of a loan drastically.
For example, payday lenders and title loan companies are considered predatory lenders because they charge extortionate interest rates. Many of the people that use this form of finance are either desperate or don't know what they're signing up for. This results in extremely large amounts of debt – some of these lenders charge up to 1,000% APR, making it next to impossible to escape debt.
Interest can accumulate and can add up to a lot more than you may think from looking at the initial APR – make sure to understand how essential obtaining a low interest rate can be.
Online Personal Loans: Making Interest Comparison Easy
In the past, comparing interest rates was much more difficult. You would have to go to different banks and credit unions to request an interest rate range – this is a time consuming and annoying process. In recent times, many online lenders have come to the marketplace. These lenders allow you to check interest rates easily and compare the market.
There are quite literally hundreds of online lenders that can provide you with personal loans – some are much better than others. Use the modern world of technology to better assess what type of interest rates are available. You never have to leave the comfort of your home to be financially responsible.
Different Forms of Interest Calculation
So, what are the different forms of interest calculation? For personal loans, the answer is typically quite simple – but it will depend on your lender. Credit card lenders tend to get a bit more creative with their interest calculations.
With personal loans, you'll typically receive an APR which is the annual amount of interest that you pay on the loan. Many people make monthly payments on their loans, which makes calculating interest very straightforward. An online personal loan calculator can help you determine the full cost of the loan dependent on your interest rate and loan terms.
For lenders that allow you to make frequent payments, you can sometimes reduce the amount of interest you owe by paying more towards your loan. There is typically a minimum monthly payment throughout the term of the loan, but if you pay more than this, or more frequently than monthly, you may be able to reduce your overall interest burden.
Understanding Interest Ranges
The hard part about comparing interest rates across personal loans is that you typically have to apply for a loan to see the real interest rates. Many lenders provide a range of different interest rates – the rate you get depends on your credit score and overall borrowing profile. If you apply for a personal loan, you will receive a hard check on your credit report and that can lower your score – which reduces your chances of being approved in the future.
For this reason, it's essential to try and assess what the interest rates are without applying for a full loan. You should look at the range of interest rates on offer and typically look at the highest rate – this is what you will most likely receive if you don't have stellar credit. Alternatively, you can call the lender and ask what interest rate you can expect – or request that they provide you with a rate upfront.
Other Things to Consider When Comparing Personal Loan Interest Rates
While interest rates are typically the most important component of a personal loan offer, they're not the only thing to consider. There are other costs involved in obtaining loans – making sure you understand these costs will help you get the full cost of the loan. A low interest rate may not be as good as it seems if it comes paired with a range of high fees.
Origination fees are fees that the bank will apply to the start of the loan. It's basically a fee that banks use to charge extra money when you take out a personal loan. This fee can sometimes range between 1-3%. Make sure to consider this fee when you're looking at different personal loans. If it's too high, it can impact the value of the loan.
Early Termination Fees
If you're looking to pay your loan off quickly, you may want to check if a loan has an early termination fee. Some lenders try and recuperate money by charging people for paying loans off early. This can cost a lot of money and defeat the purpose of paying a loan off early. Make sure to check for origination fees when you apply for a loan.
Late Fees and Penalties
Another thing to look out for is late fees and penalties. If you end up paying payments late, you need to be sure the costs won't be extortionate. You should always aim to pay back your loans on time, but if you think you may struggle, make sure to consider the late fees and penalties associated with the loan.
While company reputation may not seem important, it's actually one of the most essential components of a personal loan decision. Working with the wrong lender can completely outweigh a good interest rate. If your lender has hidden fees and poor customer service, they're not worth working with. You should always ensure you work with a lender that has a good reputation with past customers.
To check a company's track record, have a look at consumer watchdog sites and assess if they have a good reputation. Consumer Affairs and the Better Business Bureau are great websites if you want to check the reputation of a company. These sites provide a platform for past customers to review companies. They also do some of their own research to determine a company's viability.
Verdict: Compare as Much as Possible
It's always important to conduct a personal loans comparison. There are plenty of easy money loans comparison tools online – they can help you check the value of your loan. You need to be certain you're getting good value for your loan – don't pay more out of laziness. A personal loan rates comparison is the best way to find out if you're working with an affordable lender.
Also, make sure to consider the other components mentioned in this article. They play a vital role in ensuring you get the best value loan possible.
Robert is our in-house expert on personal loans and finance. He got an MBA, specializing in Finance, before joining the workforce. After working for multiple Fortune 500 companies in the past decade, he brings a wealth of knowledge and experience to the table.