Best Lenders for Personal Loans

By Christina Majaski on 24 August 2016 1 comment

We all need a little help getting ahead from time to time. Whether you need to pay off bills, purchase a new car, or take care of some other expense, you may find personal loans to be a more affordable option than a credit card or payday loan. The trick is to find a stable lender willing to give you what you need without overburdening you with extra fees or high interest rates. (See also: 5 Times Personal Loans May Be Better Than Credit Cards)

When to Use a Personal Loan

Traditional banks, credit unions, and even online lending institutions tend to offer loans with better repayment terms and lower interest rates than credit cards. Depending on your credit score, personal loans average anywhere from a fixed 6% to 30% interest rate with repayment terms of a 24 to 60 month period.

In general, personal loans are great for:

  • Consolidating debt or paying off other credit cards
  • Purchasing cars or other vehicles
  • Paying for urgent medical expenses
  • Financing home renovations or remodeling projects
  • Paying for a wedding or funeral
  • Funding unexpected large purchases, such as when your washer, dryer, or fridge breaks down

Costs Associated with Personal Loans

While the cost of taking out a personal loan is often less than using a credit card or another form of financing, you might encounter other hidden costs. Keep the following in mind:

  • Application Fees. Some lenders require an upfront application fee to cover the cost of running credit reports and reviewing your application.
     
  • Origination Fees. This fee can vary from 1 to 8 percent, and often this fee gets deducted from your loan amount before you receive it. This means that if you request a $10,000 loan, the actual amount you end up getting could be $9200. Make sure what you need is the amount you’re getting.
     
  • Interest Rates. Interest rates are important and add up. Look at your payment schedule to understand exactly how much you’ll end up paying, and for how long.
     
  • Late Payment Fees. Know the terms of your contract and make sure your payments are in on time. Lenders may charge a late fee if they receive your payment after the due date.
     
  • Check Processing Fees. Some institutions may penalize you for not using their online system or automatic withdraw options.
     
  • Personal Loan Insurance. This type of coverage will help to repay your loan if you suddenly become disabled or die.
     
  • Prepayment Fees. These are sometimes charged if a borrower pays their loan off early. It’s to protect the lender from losing the income the interest they would have been paid over the full life of the loan.

These are just some of the fees you may encounter with a personal loan. The Truth in Lending Act requires financial institutions to list all of the fees they may charge, so review this list of each lender carefully so you are not taken by surprise.

Find Your Best Match

No are no shortage of companies offering personal loans. Some lenders work with any credit score while others only entertain near perfect credit. The differences in interest rates, repayment terms, and extra fees can be astounding. Here are some commonly used lenders you may want to look into first:

Personal Loans vs. Credit Cards

The average credit card interest rate is currently around 17.73% and can quickly increase if you have a low credit score or miss payments. The variable nature of credit card interest rates can cause quite a bit of damage to your bottom line. The only real argument for using a credit card instead of a personal loan is if you are able to find a promotional offer that allows you to transfer all of your balances into one place or one that gives you zero interest for a period to quickly pay off your debts.

It’s usually more affordable to use a personal loan to consolidate your high-interest credit card balances. Not only is the interest rate lower, but you also might get a larger line of credit, which will help to protect your credit to debt ratio.

Peer-to-Peer Loans

No luck with the bigger lenders? Peer-to-peer lending programs are another great option. Peer-to-peer loan sites still gather your personal information in order to get an idea of your creditworthiness, but you can then tell your story and ask for individuals to fund your loan. You may receive funding from one person, or from several. Sometimes our peers are more willing than big institutions to take a chance on someone in need.

Top Peer-to-Peer Lenders:

  • Lending Club offers loans up to $40,000. Their origination fees range from 1-6% with 3-5 year terms.
  • Prosper is one of the oldest peer-to-peer lenders available. Loans are available for up to $40,000 with terms of three or five years.
  • Upstart loans are based on more than just a credit score. They also consider the school you graduated from as well as academic performance and work history. Loans start at $1,000 up to $50,000.

Don’t rush through the loan application process. Take some time to narrow down your options before you start filling out applications and paying for credit inquiries that may ding your credit score. With a bit of due diligence, you may find getting a personal loan from the perfect lender is a breeze.

Find the best lender for you today.

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Best Lenders for Personal Loans

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Guest's picture
Guest

Floored you didn't mention credit unions. So many offer online lending. Naturally details vary but often the cheapest personal loan is a low intro rate on a credit card.