What to Consider When Choosing a Personal Loan Provider

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A personal loan comes in handy when coping with emergencies or when you can’t afford to buy something. It is also a quick way to pay off debt or start a new business. However, it can also be an entrance to a lifetime of anxiety and debt. That’s why you should think twice before taking out a personal loan.

Once you are sure that you really need a personal loan, you will need to consider many things before choosing a loan provider. You will definitely want to find a lender who is responsible, trustworthy and reliable.

Your loan provider will need to provide you with a loan option that perfectly suits your needs. Also, your lender should support you all the way through the loan application process, including the loan repayment. Be sure to choose a lender who is clear about charges and fees.

7 Things to Look for When Picking a Personal Loan Provider

Unfortunately, not every lender is trustworthy or dependable. Here are some red flags to watch for when looking for a personal loan provider.

1. Ultra-Low Interest Rates

Maybe it sounds a bit odd, but extremely low rates could be a sign that there’s something hidden. This is especially true for the interest rates markedly below the general average. It is likely that your loan provider will screw you with high hidden fees to make up the difference.

2. Interest Rates that Are Unreasonably High

It is always a good idea to compare several lenders for the specific repayment term and loan amount. That will give you a sense of whether the interest rates are considerably high. Get a loan without being ripped off.

3. Opaque Personal Loan Costs

The next thing to look out for is opaque cost. If a loan provider is not transparent or clear about the costs, then you should avoid him. Otherwise, you may come across hidden costs later on.

4. High-Pressure Sales

Some lenders pressure borrowers to get more than they originally intended. High-pressure sales cause negative emotions, making borrowers feel rushed, stressed, and anxious. This often results in borrower’s remorse. Stay away from sales pressure to avoid dealing with a pushy lender.

5. Inability to Check if the Loan Can Be Repaid

If the loan provider does not run a credit check, there is no way to find out whether you can pay back a personal loan. It is a clue that the lender intends to cover the risk with high rates and fees.

6. Interest Rates that Aren’t Monthly

As you may already know, personal loans involve monthly interest rates in most cases. However, some lenders quote their rates on a weekly or daily basis to hide very high fees and rates. This makes the interest rates appear somewhat lower than they actually are.

7. Poor Customer Reviews

Past customer complaints usually go hand in hand with poor customer reviews. If a lot of people have complained about an issue, this is a warning sign indicating that you need to stay away from that lender.

4 Things to Take Into Account When Applying for a Personal Loan

Now that you know how to identify untrustworthy or unreliable lenders, it’s time to apply for a loan. Don’t rush into signing anything, though. Take into account the following things before getting a personal loan.

1. Research Loan Providers

Take the time to do some research on the loan providers. Be sure to take into consideration your circumstances and your individual needs. That’s because the best lender for your neighbors is not necessarily a good choice for you too, even if it is reliable and reputable.

Here are a few things to take into account in your research:

  • If you have a bad credit score, search for lenders that offer poor credit loans.
  • Your particular reason for a personal loan — some loan providers restrict how the funds can be used.
  • Loan terms (the period of time during which a borrower needs to repay a loan) — think about if you need a short-term or long-term personal loan.
  • The amount you want to borrow — different loan providers have different min and max loan amounts.
  • Variable or fixed payments?
  • Unsecured or secured personal loan?

2. How Much Do You Need to Borrow?

Many people are tempted into borrowing more than they actually need when taking out personal loans. Trustworthy lenders don’t encourage borrowers to get more than really necessary. Keep in mind that you will have to pay for every single dollar you have borrowed.

On the other hand, if you borrow too little, you will probably not have enough money to cover your purchase. Aside from that, smaller loans usually have high interest rates compared to high-amount loans.

3. Calculate Your Debt-to-Income (DTI) Ratio

As its name suggests, the debt-to-income ratio serves to compare how much someone owes every month to how much he/she earns. Specifically, it refers to gross monthly income (in percent) that goes toward monthly payments for a debt.

It is important to calculate DTI before getting a loan to have a clear idea of your current debt. Here’s how to do this calculation:

  • Add up your monthly charges that include total debt payments like student loan debt, mortgage debt, and credit card debt.
  • Add up your monthly income which may include income from your real estate, your dividends, or paycheck.
  • Divide the cumulative monthly debt by gross monthly income; it is your debt-to-income ratio.

4. Check Your Credit Score

Your credit score can determine your personal loan eligibility and affect your interest rate as well. As mentioned before, reliable lenders run a credit check in order to determine whether or not a borrower can repay their loan.

In general, credit scores can be:

  • Poor: 300-629
  • Average (fair): 630-689
  • Good: 690-719
  • Excellent: 720

If you have a poor or average credit score, it’s best to work on improving your score before applying again. It will allow you to qualify for more favorable loan terms.

The Bottom Line

Finding a dependable loan provider never happens by accident. Bear in mind the above-mentioned things to choose a trustworthy lender who will really consider your needs. This can ensure that your borrowing experience is positive when taking out a personal loan. Borrowing from a reliable loan provider, such as Lend Genius, can make it easier for you to handle a financial emergency without being crippled with debt.

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Summary
Title
What to Consider When Choosing a Personal Loan Provider
Description
A personal loan comes in handy when coping with emergencies or when you can’t afford to buy something.

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