A quick online search can reveal dozens of lenders offering personal loans. Unfortunately, many of those lenders aren’t the best option for you. Not all lenders are equal, and finding a good one often takes some work.
How do you spot a good personal loan company? Below are ten traits to look for in a legitimate personal loan company and tips on what to look for during your search.
1. A Good Reputation
Finding a personal loan lender with a good reputation is imperative. Taking out a personal loan is a sizable financial decision and one you shouldn’t take lightly. Plenty of lenders claim to have the lowest rates and make other promises to borrowers. Finding a good lender means taking time to do some research to ensure you’re working with a reputable company.
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Consult sources like the Better Business Bureau (BBB) and the Consumer Financial Protection Bureau (CFPB) to view borrower complaints against lenders.
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Ask your friends and family for recommendations. Hearing about someone’s experience firsthand is often the best way to learn about a lender.
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Does the lender offer any statistics or reports to back up claims made on its website? Look for proof if they promise anything specific to draw in customers.
2. Positive Reviews
Another way to find a good lender is to read online reviews. Of course, you can’t believe everything you read online, and everyone has a different experience. Reading reviews online can help you see any trends, good or bad, with a particular lender.
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Search sites like Trustpilot to read customer reviews of lenders.
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Many lenders have customer reviews directly on their sites.
3. Competitive Rates
One of the primary reasons people choose one lender over another is the interest rate offered. The loan amount isn’t the only factor that determines how much you’ll end up paying. Your loan term and your interest rate also affect how much you’ll end up paying over the life of your loan. Scoring a lower interest rate is usually the result of having good credit. Even so, not all lenders offer the same interest rate range.
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Use an installment loan calculator to compare loan costs with different rates.
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Take advantage of prequalification to check rates before applying for a loan.
4. Offers Prequalification
Some lenders allow you to prequalify for a personal loan before you officially apply for a loan. Typically you’ll be asked to provide information on the reason for the personal loan, how much you want to borrow, and some personal information. In minutes, you’ll determine if you prequalify for a personal loan and the interest rates you could receive when applying. Prequalification requires a soft credit inquiry that won’t negatively affect your credit score.
Keep in mind that lenders will run a hard credit inquiry when you apply for a personal loan which could cause your credit score to drop temporarily.
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Use prequalification to shop around for the best rates without affecting your credit score.
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Keep track of the rates received so you can quickly compare them.
5. Flexible Payment Options
Another factor to consider when looking for a good personal loan is the type of repayment terms offered. Regardless of the reason for your loan, paying it back shouldn’t be a financial burden. Some lenders offer several repayment options, including varying term lengths. The best lenders work with customers to find repayment options that work for both parties.
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Make a note of repayment terms and options available when shopping around for a lender.
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Think about what repayment option works best for your situation and find lenders that offer what you need.
6. Accessible Customer Service
All lenders offer customer service, but some make it harder to deal with than others. Find a lender that offers multiple support options. Mobile access is more important than ever, so try to find lenders that offer ways to connect online if that’s a priority. Some lenders have specific support hours, while others offer 24/7 customer support.
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Make sure the lenders on your shortlist offer customer service options that align with your needs.
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Pay attention to reviews that mention interactions with customer service to get an idea of the type of support you may receive.
7. Fast Funding
Many online lenders offer quick access to loan funds. In some cases, you can get approved and receive funding the same business day or soon after. Other lenders may take up to a week or longer to provide funding. If you plan to use the money quickly, you need to find a lender that offers fast funding.
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Search for details on funding when comparing lenders.
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Help speed up the approval process by providing your lender with complete and accurate information during the application process.
8. Transparency
Customers want to know what they are getting before committing to a lender. However, some lenders prefer not to disclose information about loan products. While most lenders don’t disclose all underwriting guidelines, some share fewer details than others. It’s hard to trust a lender that makes promises but doesn’t provide enough details upfront before you commit.
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Look for loan details on a lender’s website, including the fine print.
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Contact the lender for clarification if you don’t find the information you need listed on its website.
9. Low or No Fees
Lenders often charge various fees when you take out a personal loan. One of the most common fees is an origination fee, which is an upfront fee charged by lenders for processing your loan. Origination fees are typically a percentage of your loan total. Other fees charged by lenders include late fees and prepayment penalty fees. The last thing you want when borrowing money is to pay extra costs.
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Check with lenders on what fees they charge before you apply.
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Make every effort to make on-time payments to avoid late fees.
10. Prepayment Without Penalty
As mentioned, some lenders charge prepayment penalty fees. This is a fee for paying off your loan before your loan term ends. Why would a lender care whether you pay off your personal loan early? They make less money in interest charges if you pay off your loan before the term ends.
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Check with lenders to see if they penalize borrowers for paying off loans early.
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Avoid lenders that charge prepayment penalties if you plan on paying ahead on your loan.
