Finding the right lender is an essential first step to finding the best personal loans. Here are the main things to look out for when trying to find the best personal loan companies.
Type of lender:
There are marketplaces like Credible and LendingTree, direct lenders like Marcus by Goldman Sachs, and P2P lending platforms like LendingClub. All these lender types offer different advantages, so it’s important to know who’s who when searching for a loan.
Ease of use:
These days, all the best lenders allow their customers to apply for loans over the internet. Compare lender websites and read lender reviews to understand which are the easiest to access and use. Most will offer online account access, so you can check your loan balance, accrued interest and make payments.
There are 2 types of lenders in the personal loans business: trusted lenders that are completely open and transparent about their terms; and shifty lenders that make a bad name for everyone else. These days, all it takes to find out if a lender is trustworthy or not is to read user reviews and look them up with Trustpilot and the Better Business Bureau.
When you take out a 4-figure, 5-figure, or 6-figure loan, you deserve the best customer service. All the lenders mentioned on this page are known for offering excellent customer service. This means that you’ll always have someone to ask questions to or express concern about a payment.
How to Find the Best Personal Loan
Now that you’ve got a shortlist of lenders, it’s time to compare personal loan options. Here are the things to look out for when making your personal loan comparison:
This is the annual percentage rate your lender collects for providing the personal loan. The best lender for you is the one that can offer the best APR for your credit rating, not the one that offers the lowest APRs in general.
In recent years, the best lenders have started offering no-fee personal loans. That means no origination fees, no prepayment penalties, and no (or minimal) late payment penalties.
While rates and fees are important, it’s important not to neglect the terms because this can have a big impact on your monthly payments. The shorter your repayment term, the lower your total interest paid but the larger your monthly payments. The longer your term, the more interest you’ll pay overall but the less you’ll pay each month.
You might need a personal loan for $1,000 or you might need to borrow $100,000. Either way, make sure your chosen lender can satisfy your loan requirements. Each one will have starting loan amounts and maximum loan amounts. You won’t be able to receive a loan of $50,000 from a lender that only goes up to $35,000.
How to Get the Best Rates on Your Personal Loan
Here are our top 5 tips for finding the best personal loan rates:
Running a personal loan comparison of at least 3-5 lenders is a crucial first step to finding the cheapest rates. Loan marketplaces make this especially easy, with one application fetching you multiple quotes.
Improve your credit score:
If a low credit score is preventing you from getting the best rates, the good news is there are ways to repair your credit, such as taking out a small loan, paying your full monthly credit card bill, or raising your credit limit.
Sign up for auto-pay:
Many lenders offer a small rate discount if you use auto pay, because this gives them confidence that you’ll make your monthly payments on time.
Take a secured loan:
If you’re confident of your ability to pay back the loan, adding collateral can help convince your lender to offer you a lower rate. This does have some risk though, if there’s a chance you’ll struggle to pay the loan back.
Bring a cosigner:
Only some lenders allow a co-applicant; if your cosigner has better credit than you, this can help get you a significantly lower rate. The cosigner is taking responsibility to pay your loan if you can’t though, so consider your relationship with the person your asking, and if there’s any chance you’ll default on the loan, leaving them with the payments.
The Stages of a Personal Loan Application
The best online lenders usually have an easier loan application process than banks. Here are its 3 stages:
Stage 1: This generally consists of an online questionnaire where you are asked to provide information including the amount of the loan, the purpose of the loan, and your personal information. You will also probably be asked to provide your income level and housing status.
Stage 2: This involves a soft credit pull, which won’t affect your credit rating like a hard credit pull. Based on the credit score and other details you provided the lender, they will determine how much to loan you and under what terms and interest rate.
Stage 3: Once your application has been pre-approved, most online lenders will then put you directly in touch with the lender, and you will finish applying directly with them. You should have all relevant paperwork on hand and ready to send, including your driver’s license or passport, proof of residence (utility bills, rent contract, etc), and pay stubs from your place of work.
Personal Loans FAQs
How is a credit score calculated?
Your credit score is calculated based on your loan repayment history, credit card usage, and other financial markers that can give lenders a rough guide of how responsible you are with money and how much of a default risk you are. No matter what your credit score is, you will be able to find a lender that will offer you a loan.
How do interest rates work?
The interest rate is how much the lender charges a borrower for a loan and is expressed as a percentage of the amount borrowed. For example, if you take out a loan for $10,000 with an interest rate of 5%, you’ll end up paying $10,500 over time. If you get an interest rate of 10% though, you’ll be paying $11,000. If you’re consolidating debt and the interest rate is still lower than your earlier loan, then you’re in good shape.
What is an APR?
APR is an acronym for annual percentage rate. It combines the charges, fees, and payments to tell you the grand total of what your loan will cost you per year. The lower the APR, the less you are going to pay in the long run.
The APR calculation on personal loans will vary depending on your lender, but it will typically be lower than what you would receive from a payday or short-term loan—usually starting at 10% and capping at 35.99%. It is not ideal to owe any money, but if you require a loan, then a personal loan could certainly be a viable option.
Representative example: assuming a loan of $10,000 over 60 months at a fixed rate of 3.1% per annum and fees of $60.00. This would result in a representative rate of 3.3% APR, with monthly repayments of $180.80, for a total amount paid of $10,848.00.
How much can I get approved for?
There isn’t a clear right or wrong answer to this question—it all depends on your needs, your income and your abilities. You need to make sure that the monthly payments aren’t too heavy for you to keep up with. After all, there’s no sense taking out a loan only to find yourself unable to keep up with the payments.
What loan term should I take?
This is a pretty simple calculation, but what works for you can be anything but simple. If you decide to go for a lender that offers short term loans you will have higher monthly payments but will pay less interest over the life of the loan. If you spread it out over a longer loan term, your monthly payments will be lower, but the overall interest you pay will be higher.
* Credible Terms and Conditions:
Credible is so confident in the personal loan rates you’ll find on Credible, we’ll give you $200 if you find and close with a better rate elsewhere. See full terms and conditions.
** LendingClub Terms and Conditions:
All loans made by WebBank, Member FDIC. Your actual rate depends upon credit score, loan amount, loan term, and credit usage & history. The APR ranges from 6.95% to 35.89%. The origination fee ranges from 1% to 6% of the original principal balance and is deducted from your loan proceeds. For example, you could receive a loan of $6,000 with an interest rate of 7.99% and a 5.00% origination fee of $300 for an APR of 11.51%. In this example, you will receive $5,700 and will make 36 monthly payments of $187.99. The total amount repayable will be $6,767.64. Your APR will be determined based on your credit at the time of application. The average origination fee is 5.49% as of Q1 2017. In Georgia, the minimum loan amount is $3,025. In Massachusetts, the minimum loan amount is $6,025 if your APR is greater than 12%. There is no down payment and there is never a prepayment penalty. Closing of your loan is contingent upon your agreement of all the required agreements and disclosures on the www.lendingclub.com website. All loans via LendingClub have a minimum repayment term of 36 months. Borrower must be a U.S. citizen, permanent resident or be in the United States on a valid long term visa and at least 18 years old. Valid bank account and Social Security number are required. Equal Housing Lender. All loans are subject to credit approval. LendingClub’s physical address is: LendingClub, 71 Stevenson Street, Suite 1000, San Francisco, CA 9410
*** Marcus By Goldman Sachs® Offer Terms and Conditions:
For NY residents, rates range from 6.99% to 24.99% APR. Only the most creditworthy applications qualify for the largest loan amounts and lowest rates. Your loan terms are not guaranteed and are subject to our verification of your identity and credit information. To obtain a loan, you must submit additional documentation including an application that may affect your credit score. Rates will vary based on many factors, such as your creditworthiness (for example, credit score and credit history) and the length of your loan (for example, rates for 36 month loans are generally lower than rates for 72 month loans). Your maximum loan amount may vary depending on your loan purpose, income and creditworthiness. Your verifiable income must support your ability to repay your loan. Marcus by Goldman Sachs is a brand of Goldman Sachs Bank USA and all loans are issued by Goldman Sachs Bank USA, Salt Lake City Branch. Applications are subject to additional terms and conditions.
**** LightStream Terms and Conditions:
Your loan terms, including APR, may differ based on loan purpose, amount, term length, and your credit profile. Rate is quoted with AutoPay discount. AutoPay discount is only available prior to loan funding. Rates without AutoPay may be higher. Subject to credit approval. Conditions and limitations apply. Advertised rates and terms are subject to change without notice. Payment example: Monthly payments for a $10,000 loan at 5.95% APR with a term of 3 years would result in 36 monthly payments of $303.99. © 2020 Truist Financial Corporation. SunTrust®, Truist, LightStream®, the LightStream logo, and the SunTrust logo are service marks of Truist Financial Corporation. All rights reserved. All other trademarks are the property of their respective owners. Lending services provided by SunTrust now Truist Bank.