When you start searching for a lender online and offline, you will be given so many options. For this reason, you will find it challenging to choose one where you will apply for a personal loan. Additionally, you will likely choose a lender that doesn’t fit your needs or worst. You will end up with an illegitimate lender.
If you want to avoid this unfortunate thing from happening, you must take time and be careful in choosing a lender. You need to watch out for things to ensure that you will end up with the right and legitimate lender for your personal loan needs.
To help you with your search, we discuss five vital things that you should watch out for when selecting a suitable lender for you.
Check if the Lender Offers Competitive Interest Rates
Every borrower will need a lender that can provide low interest personal loans. You are borrowing money in the first place because you are currently having financial problems, and getting a loan with a competitive interest rate can be a huge help when you start repaying the loan.
Check out different lenders and compare their rates and fees. If you do this, you can have a good overview of the market and see who amongst them offers the best interest rate. You should also consider the type of personal loan the lender is offering.
You might encounter both fixed-rate loans and variable-rate loans. A fixed-rate loan is a loan interest rate that won’t change throughout the loan term. Meanwhile, variable rate loans, also referred to as adjustable-rate loans, are loans with an interest rate that changes over time.
Thus, start compiling a list of lenders and start narrowing it down based on the interest rate they offer.
Look for a Lender That Offers Suitable Terms
Your needs and current financial situation also play a significant role in selecting the best lender. It would be best to consider that a short loan term would mean that you will have to pay a larger repayment amount every month.
On the contrary, you will only have to pay a smaller monthly repayment if you go for a longer loan term. Loan terms are usually between 12 to 60 months, and you can also find some lenders that offer longer loan terms.
Although most borrowers tend to choose a longer loan term because of how affordable the monthly repayment is, they end up paying more in the long run. So, it would be best if you chose wisely. If you can afford to take on a short loan term, you should go for it.
Examine the Fees Charged by the Lenders
Aside from the interest rate and loan term, it would be best if you also took the time to read about the fees that lenders charge their clients. A personal loan comes with various fees that the lender will charge you when you apply.
These fees are:
- Annual fee
- Origination fee
- Late payment fee
- Application fee
- Prepayment penalties
These abovementioned fees are the most common amongst all the fees a lender can charge you. If you see other fees in the contract that are not in the list above, you should start asking questions about those fees. It is a great way to understand where your money will go and if the fees imposed are legal.
The Lender’s Reviews and Ratings
You can know if the lender you chose is a legitimate business through their reviews and ratings. Reviews and ratings are made by the company’s previous customers who either experience the best service or the worst.
Take time to read the reviews and check the lender’s ratings that you can usually find online. You can search for the lender’s name on Google or Yelp to find what their customers say about them. Additionally, you can also check for the lender on the BBB or Better Business Bureau website.
It is also advised to visit the lender’s website and investigate. Check for contact information like an email address and a contact number. You should also look for a physical address and avoid P.O. Box addresses. Even online-only lenders should have a physical address.
See if the Lenders Have Excellent Customer Service
Good customer service is another indication that the lending company is reputable. As a client, you should ensure that your lender can provide you with assistance and answer any questions you have in a reasonable and timely manner.
Questions and issues are expected to arise throughout your loan term, and the lender’s customer service is your number one go-to for these queries. Unfortunately, if the customer service is unreachable, rude, or doesn’t reply on time, your issues will not be addressed. As a result, it can get worse over time.
Good customer service is crucial, primarily if you transact with an online-only lender. Although you can visit their physical address, it can be very inconvenient.
Choosing the Best Lender Is Easy
By watching out for these five things mentioned above, selecting the best lender that suits your needs and situation will become easier. You can use this article as the baseline of your lender search, and you can be assured you will choose the right one for you.