Personal loans are a great option when it comes to funds. However, don’t hurry and get just any personal loan. You want to try to get the lowest personal loan rates. There are many factors that you need to consider before finalizing your decision when picking the best low-interest personal loans.

How to Find the Best Personal Loan

Personal loans are a great tool when a borrower needs money. The money can be used for many different things, whether you want to improve your finances by consolidating debt, or if you want to pay for a special day. There are some tips that you can follow to find the best personal loan for your lifestyle and budget! We’re going to show you how to select and get the best out of your personal loan.

Know Your Credit Standing

To get a personal loan, you will need to go through a credit check. Before you have a lender check your credit report, you should check it first. You can get a free credit report online, and review the information. If you find that there is an error on your report, then you can dispute it! If you are able to successfully get the negative impact on your score dropped, then your score will rise. Not every credit lender has the same credit requirements, either. Some may require you to have a higher minimum credit score than other places, which is important to keep in mind!

Improve Your Credit

If you found that your credit score may not be up to par, then improve it! There are a bunch of factors that can help or hurt your credit scores like credit utilization, the average age of your accounts, the number of hard inquiries, and more. That is why you should make sure that you proactively build your credit. Luckily, there are plenty of ways that you can do that. Some ways are:

• Try to get your credit card usage down to below 30%
• Get rid of any delinquent accounts by bringing them up to date
• See if you can report your utility bills towards your credit (try this with Experian Boost)
• Do not have any late payments

If you find that you are struggling to handle your current debt, get in touch with your lender as soon as you can. They may be more flexible than you realize!

Be Selective About Your Lender

In other words, make sure that the lender that you are working with is a legitimate organization, such as a bank or finance firm. There isn’t one “best” bank to get a personal loan from, it all depends on your financial situation. When you go through their website, try to find a street address and a proper phone number. Don’t go to just anyone. Online personal loan lenders run a higher chance of being a scam. The first thing you always need to confirm when you take or give money to any organization is their credentials. Not only should you be selective about the lender, but be selective about the loan itself. Make sure to ask about the details of each loan option that the lender has to offer. If there is anything that doesn’t satisfy you, move on to the next lender. If you are interested in other lender options like private money lenders, personal loans can be found there as well!

Check Out Peer-to-Peer Lending Platforms

While banks and other financial institutions can be a great option when it comes to your personal loan lender, you want to make sure you check out everything else available. This is where peer-to-peer lending platforms come into play. These platforms can have more flexible eligibility requirements and may be able to provide those with a subprime situation an option for personal lending.

Consider a Credit Union

Sometimes credit unions may offer especially competitive rates and fees. You can see if the local credit union in your area can beat what other lenders have to offer. If you want to review your local options,  you can look online at the National Credit Union Association website.

Understand Loan Restrictions

Some lenders may impose loan restrictions. These loan restrictions may include limitations on when you can repay a loan, how you can use the funds, etc. For example, the lender would not be okay if you tried to use credit debt consolidation funds for a vacation. Some lenders specialize in specific situations, so you need to make sure what you want to handle can be handled in an ethical way.

Keep Hard Inquiries in Mind

To get a personal loan, your lender will need to submit a hard inquiry. These hard inquiries can have a negative impact on your credit. In fact, one hard inquiry can cause your credit score to decrease by up to 5 points! That is why you need to be mindful of these during the personal loan process.

To be proactive with your inquiries, you can review your lending opportunities by prequalifying with a soft inquiry. These soft inquiries can give you an estimate of your lending limits without impacting your credit. This estimate may not be 100% accurate, but it can give you an idea with no repercussions!

Consider Affordability

Don’t take on crazy loans that you know you won’t be able to afford in the future. Getting a loan that you will not be able to realistically pay back is a setup for failure. You could end up either getting sued for not being able to pay back the loan or being forced to declare bankruptcy in some scenarios. Other than that, it could also make your financial history look bad and will impact your credit score. Affordability is very important, but negotiate a realistic payment plan that you are confident that you can follow.

Choose Long-Term Loans

Negotiate for a long-term loan. Long-term loans will give you time to pay them in small installments. If you think you have the ability to pay it sooner, then you may negotiate a more short-payment plan. Make sure to opt for a loan that doesn’t have a pre-payment penalty. You can avoid high-interest rates if you repay the loan quickly with no penalty fees.

Use a Personal Loan Calculator

Not everyone is a whiz kid when it comes to math. That is why you should take advantage of all the free tools available. One of these tools is a personal loan calculator that can make it easy to compare rates, terms, fees, and loan amounts across different lenders. There are plenty of different ones to use online, so find one that is easy to use. This makes the whole comparison process much easier and helps you make an educated decision without having to rely on someone else to give you information.

Pay Back and Don’t Slack

Most importantly, stick to the payment plan that you made with your lender. If you have trouble sticking to it, then tell the lender that you are having a hard time keeping up with the expenses. They may be able to renegotiate the repayment plan terms. In the end, lenders want their money and are open to discussing a suitable arrangement with all of their clients.

How to Get a Personal Loan

Getting a personal loan doesn’t need to be a stressful process. In fact, with proper preparation, you can make the process much easier to manage. The loan process can be broken down into a few easy steps:

1. Understand Your Motivation
2. Understand Your Budget
3. Compare Your Lenders
4. Begin the Application Process

Step #1: Understand Your Motivation

Why do you want a personal loan? The answer will show you which type of loan you should be looking at. For example, if you specifically want to consolidate your debt, you may want to look at specialized loan options that focus on that goal. This can also help you understand how much you need your loan to be. Common reasons that people consider personal loans are:

• Debt Consolidation
• Credit Refinancing
• Home Improvement
• Medical Debt
• Unexpected Expense
• Vacations
• Weddings

Understanding your motivation can also help you find lenders that focus on borrowers that have similar goals as yourself!

Step #2: Understand Your Budget

You want to make sure that you know your credit score and that you can afford the loan! Taking on financial responsibility means you need to understand your limitations. This is important because if you find yourself struggling to make payments, you may find yourself in a worse situation than where you started.

Step #3: Compare Your Lenders

Now that you know the type of loan you want and what your limitations are, you can look for and compare lenders. Comparison shopping is key in finding the best rates possible. You want to compare your options without submitting hard inquiries so that you don’t negatively impact your credit when looking.

Step #4: Begin the Application Process

Now that you found your lender, know your loan type, and know your budget, you can begin the application process. You will need to provide documentation that the lender requires, which varies by institution. Once you submit your application, the lender will (hopefully) approve, and you can enjoy your personal funds!

Different Options from Personal Loans

While personal loans can be a great option, they may not be best suited for specific types of financial situations. That is why you may need to consider other options besides a personal loan.

Consider a Home Equity Loan or a Home Equity Line of Credit (HELOC)

If you are a homeowner that has accessible equity in their home, then this could be a great option for you. Homeowners that need money can tap into their home equity and essentially get cash out of their home. Both a home equity loan and a HELOC use the home as a form of collateral for the loan. It is important to handle these repayments responsibly in order to avoid foreclosure.

Get a 401(K) Loan

While some individuals may be able to get cash out of their home equity, others may be able to get cash out of their retirement savings. A 401(K) loan takes money from your retirement account instead of borrowing from a lender. This may be an option to consider, but shouldn’t be chosen lightly. You must think about the option you choose because if you mishandle these funds then your retirement could be in jeopardy.

See if Your Employer Will Give a Salary Advance

If you are in need of funds right away, you may be able to get some through your employer. In some situations, your employer can provide an agreement that allows you to receive some or all of your next paycheck in advance. This is primarily seen with salary employees. Not every company will provide this opportunity, so you should check with your employer if you are interested!

Get a Small Business Loan

If you are a business owner looking for some extra funds, you may want to consider a small business loan. A personal loan is meant for personal expenses but if you are trying to get funds for your business, then this type of loan would be better. If you choose this funding option, you can expect a longer application process since the lender needs to look at your business history as well as personal history when considering you as a borrower.

Overall 

Personal loans are a great way to fund your personal expenses. There are some tips that you can follow when it comes to finding the best personal loan for your situation. However, if you want to consider some other options, there are alternatives that you can check out as well. These alternatives may be a better option for your budget!