If you are thinking of getting a loan, deciding to compare personal loan lenders before making your decision is an important step. There are a few different factors which you should keep in mind, which we will discuss below.
1. The interest rate
Perhaps the most obvious one for most people, the interest rate (the amount that the financial institution charges you on top of the money you lend) should be a factor to consider when choosing your loan provider. After all, the lower this rate is, the less you will have to pay over the life of the loan. The rate can vary based on the type of loan and the amount borrowed.
Salespeople are very good at making any offer seem attractive and unique, but you must always consider the loan terms of different banks and compare the interest rates before signing anything. You can either conduct your own research by going to the websites of the loan lenders to find out their interest rates or you can use the services of financial websites that will help you acquire the information based on your request.
Keep in mind that, typically, a secured loan will have a lower rate than a loan that is unsecured.
2. The lending fees
Even if you find the lowest interest rate on online loans for bad credit, you should not directly choose that lender. Smart advertising is often used to draw you in and you will have to deal with (sometimes undisclosed) closing fees and flat rates.
Sadly, amazing rates won’t really make a difference if the provider still gets money from you in the form of hidden costs, which is why it is good to always ask about any other fees they might charge you.
The fees that usually come with a personal loan are processing fees (between 1% and 3%) and service tax for the services provided by the bank. Some providers may also charge for changing the repayment terms, and many will hit you with additional charges in case you miss a payment. Most likely, you will also have to pay interest on these fees as well.
3. The terms and conditions
Even though you might not be used to reading the fine print of every document you sign or agree to, this is not one to skip. The terms and conditions of a loan mention every important detail, from the payment period and monthly charge, to the possibility of lump-sum payments. The ideal payment period depends on your financial circumstances, so you need to find a provider that can best match your needs.
You should also make sure you can make lump-sum payments towards your loan or pay it off early since special situations such as having some unexpected money might allow you to afford early payments to pay off your loan, but some loan providers may charge early exit fees if you agreed to it when signing the contract.
When signing up for a loan, you want to keep your total costs as low as possible, so it makes sense to look for a lender who can offer you the lowest total overall costs, including interest rates, processing fees, and hidden costs.