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4 things to look for in a personal loan

If you need a little extra cash, our personal loans have attractive rates and an easy application process.

What to Look for in a Personal Loan


If you’ve decided that you need a little extra cash and a personal loan is the best fit for your financial needs, it’s important to make sure you’re getting the best offer.

Affordability is a top priority for most borrowers. If one lender offers a super low annual percentage rate (APR), that’s probably the best option for you.

But if you have two or more competitive offers, you should take the time to weigh things like discounts, payment flexibility, and customer service.

Here are 4 things you should look for in a personal loan.


1. No fees

While application and prepayment fees are rare with personal loans, it is possible to see an origination fee. Usually around 1 to 10% of your loan amount, the origination fee is subtracted from the loan before you get it. You don’t get anything for paying the fee. It’s just money the lender charges to process the loan.

An origination fee in and of itself doesn’t mean the loan isn’t the best option, though. You should still compare annual percentage rates and other potential fees, to see which loan costs the least in the long run.

If you have good or excellent credit, some lenders may waive all fees, including late payments and nonsufficient funds fees.


2. Rate discounts

Rate discounts could seem like a small perk, but they can start to add up over the life of the loan. Some lenders offer to reduce rates by 0.25 to 0.5 percentage points when you set up automatic payments.

Additionally, some lenders could reduce your rate by a percentage point or two when you consolidate your debt with a personal loan. This usually happens when you let them pay off your debts directly, instead of them handing the cash to you.


3. Payment flexibility

The term length of your loan is a factor in determining the size of your monthly payment. A longer term loan means lower monthly payments, but you’ll wind up paying more in interest over the life of the loan.

Ideally, your term length should give you monthly payments you can afford and keep interest costs low. Some lenders offer terms of three to five years, while others offer two to seven year terms.

You should ask your lender about payment flexibility in case of unforeseen life events. Will they let you skip a payment or two if you lose your job or have a financial emergency?

Some lenders will let borrowers defer a payment if they’ve made 12 consecutive on-time payments. Others offer unemployment protection that puts a loan in forbearance.


4. Customer experience

Unlike origination fees or rate discounts, customer experience is hard to quantify. And while it may not be a factor in your monthly payments, it does play a big role in your overall satisfaction with your personal loan.

Check the Consumer Financial Protection Bureau or Better Business Bureau websites to see if there have been any complaints lodged against the lender. Read online reviews and ask your friends and family if they’ve had any loans with that particular lender.

Credit unions, like us, have a well-known and time-honored reputation for excellent customer service. This is in part because we are owned and operated by our members, so we take the time to get to know them and treat them like a person, not a number.


The bottom line

Everybody needs a little extra cash now and then. A personal loan can be a great way to meet these financial needs.

As with any financial decision, you should make sure you’re fully informed before you commit. With a personal loan, you’ll want to make sure you get the best rate and terms possible.

You’ll also want to consider things like fees, rate discounts, payment flexibility, and customer experience.

Want to know more about personal loans? Check out more articles in our Learning Center.

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