Step 1: Research Local Lenders
Research, as with a house mortgage or financing a car is crucial when taking out a personal loan. Loan lenders are plenty, including potential scammers. Therefore, it is vital that you read reviews, get to know the lender, make sure they have a clean track record, and if you can, meet them in person.
Considering a personal loan from a reputable financial institution such as a bank or credit union can be more secure than a private lender. Yet, private lenders at times work with people with lower than average credit score.
Step 2: Check Your Credit Score
Speaking of credit score, do you know your credit score? Although it may be a fearful topic to many, a credit score serves as a method for lenders to consider your financial history. To make sure your financial history is in the best standing once the lender looks at it, it is vital that you check your credit score beforehand and dispute any potential discrepancies or pay off any outstanding debt or collection payments.
Step 3: Fees, Interest, and Term
As with any loan, there will be an interest rate for the period that you have the loan. Your interest rate may be higher or lower depending on your credit score. This is why you want to go with a lender that will work with your credit score to get you the best interest rate and minimal fees.
Alongside interest, your term on the loan will depend on your credit score and income. A longer term means paying more interest overtime, while a shorter term may mean higher interest.
Step 4: Ask Questions
In this process, asking questions is a must. To better understand your personal loan lender, the following questions will help you become more aware about the terms and conditions of taking out a personal loan.
- Does your lender work with your credit score?
- Is there an origination fee?
- How much will you pay over the length of the loan, including interest?
- What is your interest rate and is that the lowest it could have been?
- What are the fees in case you are late or default on the loan?