Compare Personal Loans

Personal loans are a fixed loan amount where you borrow money from a lending institution like a credit union or a bank. You can use this as a responsible way to pay for something expensive, allowing you to quickly reach your financial goals, especially now that you can easily find an online lender. Unlike an auto loan that’s specific to a car purchase or a mortgage for your house, you can use a personal loan towards flexible purchases. You can seek a personal loan for your education, medical expenses, a major home item such as large appliances, or debt consolidation. You have complete control over what to use the loan towards.

How Do Personal Loans Work?

With many online lenders available to you today, you can complete the application process in minutes and receive funds via personal loans as soon as the next business day. You look for a loan that fits your criteria, apply for the amount you require, and agree to a loan term. You will be charged an origination fee each time you apply for a new personal loan.

The origination fee can be between 0.5%-1% of the amount you request and can sometimes be negotiable. 

Once you are approved for a personal loan, the loan amount that you requested will be issued as a lump sum, usually deposited into your bank account. You’ll then repay this amount over a fixed amount of time on a fixed interest rate, though your interest rate is usually lower compared to rates on credit cards. The repayment term can be as short as one year or as long as ten years, depending on the loan amount you borrow and how quickly you’ll have the funds to repay. 

Once you agree to these loan terms, you’ll begin paying off your loan. If you suddenly have more income, you cannot use this to pay a larger amount of your loan without incurring a prepayment penalty. A prepayment penalty fee is an amount a lender can charge you for paying off your loan early.

How to Qualify for a Personal Loan

Your personal loans process begins by looking at where your credit score is currently. This number (usually between 300 and 850) tells lenders how likely you will repay your debt based on your previous credit history, telling them whether to approve your application for a personal loan today. Multiple lenders require a credit score of at least 660 for personal loans, so ensuring your score is at least 660, if not higher, will be the first step in the process. 

You’ll also need to ensure you have an income source to pay off your debt, origination fee, and interest rate. Once these criteria are met, you will be eligible for a personal loan.

What Should I Know About Interest Rates?

Now that we know about the minimum credit score you need, let’s talk about interest rates. These rates are the percentage of the balance you will be charged with each month through the loan term, and they are based on your credit history, score, and income level. If your score is lower than the recommended credit score, you may still qualify for the personal loan, but the rates may be too high for the lender to be a viable option. A credit score of 800 and above will ensure you receive the lowest interest rate possible. 

To understand how much a personal loan may cost you, take a look at the Annual Percentage Rate (APR). APRs are also expressed as a percentage that considers your fees and interest, among other factors, allowing you to calculate your total repayment value before you sign anything.

Legal Status and Regulation

All personal loans offered through lending institutions are covered by the Truth in Lending Act (TILA) that protects consumers while they make financial transactions. This law requires lenders to disclose the amount financed, APR, total payments, and origination fee for transparency before they agree and sign. Each state has its own laws regarding lending money. Many states have usury laws in place that cap interest rates between 10% and 20% to ensure the lender charges a fair amount each time.