You want to secure the lowest interest rate possible. Pay particular attention to annual percentage rates, or APRs, which include the loan's interest rate as well as origination charges if applicable. Read more: What are the best low-interest personal loans? Loan term.
Your loan term is how long you have to pay off the loan. You want to pay off your loan as quickly as possible to save money on interest. But shorter loan terms also mean bigger monthly payments. You never, of course, want to accept a loan with a monthly payment you can't afford. Read more: Pros and cons of longer loan terms Loan amount. Take out enough to cover what you need, but never borrow more than you need.
Read more: How to borrow a lot of money You can see how these three details impact your monthly payments using the loan calculator below. Personal loan calculator. Total Amount To Be Paid. Fix errors on form. Knowledge of different fees Some loans charge fees beyond just interest rate. Here are a couple you may see: Origination fee. Although it isn't very common, some lenders charge an origination fee. This is typically a percentage of the total loan amount.
Look for loans with minimal or no origination fee. Prepayment penalty. A prepayment penalty is a fee a lender can charge if you repay your loan before the loan term ends. Avoid loans with prepayment penalties, because it's always best to pay off your loan ahead of schedule when you can.
The good news is that prepayment penalties are not common in the personal loan industry. Get the best interest rate The interest rate you'll pay on your personal loan can vary based on a couple of factors, including your credit score and lender.
Improve your credit score Generally, you'll get a low interest rate if you have an excellent credit score.
Compare multiple lenders It's not uncommon for a borrower to find loan offers with a difference of 8 percentage points or more on the interest rate, even when applying to the best personal lenders. Know how much time you need to repay the loan It can be tempting to select the longest loan repayment term possible to keep your monthly payments low.
Resources The Ascent's top-rated lenders Best personal loans Best low-interest personal loans Best personal loans for bad credit Best personal loans for fair or average credit Best personal loans for good credit Best debt consolidation loans Best renovation loans Best medical loans Deciding if a personal loan is right for you Are personal loans bad? Does a personal loan help your credit? How long does it take to get money from a personal loan? When to get a loan instead of paying cash Balance transfer vs.
What credit score do I need for a car loan? How do I get a loan with no credit? Cosigners, co-borrowers, and collateral: Do you need them? What is a co-borrower? Co-Borrower vs. Collateral Getting a personal loan with collateral What is a secured loan? What is an unsecured loan? Secured vs. Income requirements Can you get a personal loan if you're unemployed? Can you get a loan without a job? Can you get a loan while on disability? Other debt: How many personal loans can you have at once?
Finding the right personal loan Deciding on a loan amount How much personal loan can I get? How to borrow a lot of money What's the lowest amount you can borrow with a personal loan?
How much car can you afford? Comparing interest rates How to compare personal loans What is a good interest rate for a personal loan? What is a fixed interest rate? What is an adjustable interest rate? Figuring out monthly payments Pros and cons of long repayment terms on loans What is an equated monthly installment?
EMI All about loan fees What is an origination fee? What is a prepayment penalty? What is force-placed insurance? Types of lenders Can I get a personal loan online? Our credit card balance transfer calculator will help you see how long it will take to pay off your balance. Personal loans may come with fees and penalties that can drive up the cost of borrowing. Some loans come with origination fees of 1 percent to 6 percent of the loan amount.
The fees, which cover loan processing, can either be rolled into the loan or subtracted from the amount disbursed to the borrower. Some lenders charge prepayment penalties if you pay the balance off before the end of your loan term. Before applying, review all fees and penalties of any personal loans you are considering. Credit cards come with small minimum monthly payments and no deadline for paying your balance off in full.
Personal loans require a higher fixed monthly payment and have to be paid off by the end of the loan term. Personal loans can be a tool for consolidating debt such as credit card balances, but they do not address the cause of the debt.
When you pay your credit cards off with a personal loan, it frees up your available credit limit. For overspenders, this offers an opportunity to rack up more charges rather than free themselves from debt. Personal loans are an attractive option if you need quick cash; with many lenders, especially those that operate online, funds can be made available in a matter of days.
Interest rates can also be low, particularly if you have good credit, making personal loans a good way to consolidate and pay off credit card debt.
Other good reasons to use personal loans include paying for emergency expenses or remodeling your home. However, personal loans are not a good idea for everyone. After all, personal loans are still a form of debt. In some cases, it may make more sense to build up your savings to pay for a large purchase instead of taking out a personal loan and making payments with interest for many years.
Weigh the pros and cons of taking out a personal loan rather than using another financing option. Use a Bankrate calculator to help you determine the best borrowing option for you. Once you have all the data, decide if the benefits of a personal loan outweigh the drawbacks before making a commitment. How We Make Money. Veneta Lusk. Written by. Veneta Lusk is a contributing writer for Bankrate. Veneta writes about personal loans. Edited By Rashawn Mitchner.
Edited by. Rashawn Mitchner. Rashawn Mitchner is a former associate editor at Bankrate. Share this page. Bankrate Logo Why you can trust Bankrate.
Bankrate Logo Editorial Integrity. Key Principles We value your trust. Bankrate Logo Insurance Disclosure. Get pre-qualified Answer a few questions to see which personal loans you pre-qualify for. If you can pay off the balance before the interest rate goes up, a credit card may be a better option.
These type of loans could provide the financing you need for larger loan amounts at low rates. But beware: Your house becomes the collateral for these types of accounts. If you default, your lender usually has the right to foreclose on your home as payment for the loan. When you apply for a loan, the lender will pull your credit as part of the application process.
This is known as a hard inquiry and will usually lower your credit scores by a few points. Interest rates and fees can make a big difference in how much you pay over the life of a loan, and they vary widely from lender to lender. Here are some things to consider. While a personal loan may be a good option if you need extra cash for a specific purpose, there are many factors to consider before deciding what type of credit is best for your situation.
As a next step, check out our take on some of the best personal loans for various needs and continue exploring your options.
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