How to Shop for a Personal Loan

Reviewed: February 22, 2014
By FinanceWeb

Personal loans can be excellent tools when you’re in need of a substantial amount of money but don’t want to use a credit card. Often, personal loans are preferable to plastic because they typically have fixed interest rates and very specific repayment terms. Simply be aware that finding the ideal personal loan and lender takes careful consideration and effort.

Find Out About Your Credit Score

The very first step you need to take when shopping for a personal loan is to find out exactly where your credit stands. This detective work isn’t as difficult as you may think. You actually have the privilege of requesting a copy of your consumer credit report from the three leading credit bureaus in the country once each year.

You may call TransUnion, Experian or Equifax, or submit a request online, to get your free credit report. Once you get this helpful tool, you will be able to check for any mistakes on your report. You will also be able to see if you have excessive late payments or other factors that may bring down your overall score. Different lending institutions have different credit score requirements, but the better your score the lower your interest rates are likely to be.

Check with Your Bank or Credit Union

Although there are numerous different places to acquire a personal loan, it is almost always best to inquire with your own credit union or bank first. They are familiar with your financial habits, which can benefit you during the approval process. However, it isn’t unheard of that banks simply will not wish to dabble in a relatively small personal loan, but will encourage you to fill out a credit card application through the bank instead. Credit unions, on the other hand, are usually pretty great about working with you to get a relatively small-scale personal loan.

Do Your Personal Loan Homework

Although you may be able to get a loan with your own bank or credit union, before filling out your application, it isn’t a bad idea to do a little lender exploration. You can use online resources to compare different lenders’ annual percentage rates, typical loan terms and even credit requirements. Carefully choose your lender. You want to be fairly certain that once you complete an application you stand a good chance for approval. You see, each and every time your credit report is pulled, your score drops just a little.

Beware of Scams

If a financial arrangement seems a little too wonderful, it probably is. Be aware that although there are some excellent lenders online, it is also rife with scam artists.

• Carefully review and authenticate the lenders that you choose.
• Don’t simply take the word of testimonials found on lender websites.
• Run searches for independent reviews of lending companies, as well.
• It’s also an excellent idea to check with the Better Business Bureau before dealing with an unfamiliar lender.
• Realize that it isn’t unusual for those looking to take advantage of borrowers to frequently change the name of their company.
• When applying for a personal loan your credit history will be checked, so if your lender claims that your credit doesn’t matter, be wary.
• Make sure that you’re working through a secured site while transferring private information.

Personal loans can help tremendously with any number of financial situations. For instance, you may want to consolidate debt or complete a home renovation project. Do your homework and carefully choose your lender and loan for the most satisfying results.