Personal loans, also called signature loans, are unsecured loans from $1,000 up to $100,000. They’re often used for consolidating debt, pay for unexpected emergencies, medical bills or home repairs. Other borrowers use them for business, taking a vacation or making a major purchase. Whatever the reason behind an unsecured loan, consumers will discover a wide range of offers to consider when rounding up offers. Comparing offers is the best way to find the best deal on a signature loan IF the borrower follows some simple guidelines.
How to Compare Personal Loan Offers
Because the borrower does not put up collateral to back a personal loan, lenders typically require higher credit scores and higher interest rates than on secured loans. LendingTree makes it possible to line up personal loan offers based on significant categories that must remain the same across the range. For example, using the apples-to-apples analogy, consumers can see how each lender stacks up using the same qualifiers based on their credit scores and history, employment status, and outstanding debt. Comparison factors are:
- Loan Amount
- Annual Percentage Rate (APR)
Personal loans are typically available from two-five-year terms. LendingTree found that interest rates in the spring of 2015 ranged from 3.99 percent to 41.7 percent. The wide range is in response to the lender’s policy, the consumers’ FICO scores, and term length. That’s why it is crucial for borrowers to compare each loan offer using the same personal metrics of qualifying data and loan amount. At the same time, borrowers should read all the fine print on offers, checking for items such as prepayment penalties and automatic rollovers.
Good Credit: Good Offers
Generally speaking, the better a consumer’s credit scores and history, the better the offers. Standard ratings are:
Poor (639 or less)
Consumers with a track record of missed or late payments, collections or debt charge-offs will probably not receive many offers for personal loans. There are reputable offers for those with credit scores under 600 or for sub-prime borrowers with a co-signer on the loan. But beware of unscrupulous lenders offering loans without a credit check. Most likely, they are calling a payday loan or check advance a personal loan. For people with bad credit, raising your score by as little as 20 points may reduce the interest rate on personal loan offers.
Read the Small Print
A last word: Before signing any offers, consumers are strongly advised to recheck their numbers, especially for the term of the loan and payment (amount and schedule). There may be costs accrued through lender up-front fees such as origination charges. Origination fees are typically deducted from the total loan amount. Ask the lender about any printed conditions you do not understand. Are there charges for life or unemployment insurance you haven’t requested? Borrowers who want the insurance should crunch those numbers as part of the entire loan amount.