If you’ve been recently let go from work or are struggling with unexpected financial burdens, it can seem like the whole world is falling apart. But getting a personal loan could help see you through those trying times.
Unlike other types of loans, personal loans can be used on various things, including rent, groceries, or utility payments. But how can you choose the right one? It all starts with choosing one of the best lenders!
What Are Personal Loans?
Personal loans are a specific type of financial loan offered by banks and online lenders. The funds received via a personal loan can be spent on nearly anything. This feature differentiates them from auto or home loans.
An individual may request a personal loan for a wide variety of reasons. Of course, financial hardship is one of the most common reasons, but long-term goals can also spur someone to take out a personal loan.
For example, moving, getting married, having a child, and many other major life experiences can be costly. Even if you have a well-paying job and a hefty savings account, it could be a could idea to seek a loan.
Personal loans are designed to help individuals achieve their goals by providing the necessary monetary support to get things done. However, not all loans are created equally.
Some personal loans sport incredibly high-interest rates. Others are only available to those with good or excellent credit. As such, choosing the best personal loan can be tricky.
The Best Personal Loans
There are hundreds of potential lenders out there, including your local bank or credit union. But many borrowers are opting for online lenders.
Not only are online lenders accessible from the comfort of home, but they may offer unique loan options not found at your bank. Still, there are quite a few online lenders from which to choose, and they’re all a little different.
Let’s explore the best personal loans offered by each of the top online lenders to ensure you end up with the best possible loan!
At the top of our list is Avant, an online lender offering personal loans with two-year to five-year terms. These long-term loans are built to accommodate lower monthly payments.
That said, Avant does have a relatively high minimum APR of almost 10%. Additionally, with a maximum loan amount of only $35,000, this lender might be best-suited to those who can pay their loan off quickly.
But the minimum credit score needed to get approved for an Avant loan is only about 580. This is far lower than other competing lenders. Consequently, Avant could be a great option for those with poor credit.
If you’ve got great credit, then SoFi might be right for you. Most accepted applicants have a minimum credits core of 680, and individuals with higher scores may be accepted more quickly.
This lender offers loan amounts varying between $5,000 and $100,000. As such, they’re near the top of the list in terms of maximum loan amounts. Their minimum APR of about 5% is also quite low.
Accepted applicants can select a loan term of between two and seven years, offering plenty of repayment options for borrowers. Still, you will need an exceptional credit rating to work with SoFi.
LightStream might be one of the best overall choices for personal loans. They offer a low minimum APR of about 5% and offer terms between two and seven years. These are incredibly competitive options.
Additionally, LightStream offers maximum loan amounts of $100,000. As such, they’re a go-to option for individuals seeking sizable personal loans.
However, most borrowers will need a credit score of 660 or above to receive a LightStream loan. If your credit isn’t up to snuff, you may want to check out a different lender.
How to Get a Loan
Now that we’ve shared some of the best picks for online lenders, it’s time to discuss the loan application process. After all, choosing a lender is only the first step.
To get a loan, you’ll need to:
- Gather Your Personal Documents
- Compare Loan Options
- Consider Interest Rates
- Choose a Loan Term
- Apply With a Lender
If it’s your first time applying for a loan of any type, you might feel a little overwhelmed by these steps. After all, it can be challenging to know what documents you’ll need or what interest rates are available to you.
We’re going to break down each of these five steps to ensure you enjoy a smooth, stress-free loan application process. As you might expect, applying for a loan starts with a little research and preparation.
Gather Your Personal Documents
Do you know how much income you earned last year? What about your credit score?
When applying for a personal loan, there’s an excellent chance your lender may ask these questions. They may also ask for your social security number, current address, and phone number.
Some of the information you provide to a lender is used to verify your identity. But other parts of your borrower profile influence your loan options, interest rates, and repayment schedules.
It’s crucial to provide accurate information when applying for a loan. Conflicting data can cause your application to get flagged for review. When this happens, it may take several extra days or weeks to process your loan.
If possible, gather your personal documents together before sitting down to apply for a loan. Your most recent year’s tax return, pay stubs, and credit score information is bound to come in handy as you fill out an application.
Compare Loan Options
While our list of the top personal loans and lenders can be a great place to start when seeking a loan, you may also want to compare personalized offers. Often, you’ll receive offers as soon as you start looking at loans.
When comparing loan options, you may be asked to provide your credit score. This isn’t out of the ordinary, and it can help your chosen search engine filter results in your favor.
That said, it’s crucial never to submit deeply personal information while searching for loan offers. For example, never share your social security number or address when window shopping for a personal loan.
As you browse your options, you’ll likely notice different loan amounts and interest rates. Please pay close attention to the APR rates you see, as they’ll significantly impact the repayment process.
Consider Interest Rates
Do you know how much your lender wants to charge in interest? If not, you could wind up with a punitive personal loan that costs more than it offers.
For example, some predatory personal loans offer same-day deposits and payouts, but they have interest rates of more than 200%. This means that borrowers typically end up paying back twice their loan amount!
When choosing a personal loan, you’ll want to consider the interest rates offered to you. Lower interest means lower monthly repayments and less money spent to maintain the loan over time.
It’s also important to think about your repayment schedule. After all, some lenders expect their borrowers to pay the loan back in less than a year. Others are far more patient.
Choose a Loan Term
If you’ve discovered a loan with a reasonable interest rate, you’ll also want to consider your loan term. Some loans must be repaid in six months or less, and others may have years-long lifespans.
Your repayment schedule will influence your monthly repayments, so it’s vital to weigh your options. If you can repay your initial loan amount in a short period, it’s worthwhile to do so. You can avoid interest this way.
However, if you’re currently unemployed or struggling to make ends meet, it’s wise to choose a long-term loan. Long-term loans with low-interest rates incur the lowest monthly payments.
Apply With a Lender
Once you’ve found a loan offer that suits your needs and preferences, it’s time to apply! With your documents by your side, you should be able to finish your loan application in a matter of minutes.
Most online lenders will respond to your application within 24 hours. However, a decision may take a few days or weeks. Generally, the more accurate the information you’ve provided, the faster the response.
Factors That Impact Interest Rates
You might be wondering why the interest rate offers you’re getting are higher or lower than expected. Or maybe you’re feeling disappointed about the number of personal loan offers you’ve received.
When you’re considering a personal loan, it’s essential to remember that three things significantly impact your options and offers:
- Employment Status
- Current Debt
- Credit Rating
Finding the best personal loan interest rates starts with maintaining excellent credit, minimizing debt, and remaining employed. Unfortunately, it’s not always possible to do all these things.
Still, if you’re not doing great in one area, the other two may be able to lift you stand out as a worthwhile borrowing candidate. In this way, you don’t always need a trifecta to get a personal loan.
For example, if you have little debt and a great credit score but you’ve recently lost your job, you could still get a personal loan. In fact, your ability to get a loan often comes down to whether or not you apply!
Find the Top Personal Lenders Today
Personal loans are crucial tools that can help make ends meet during times of financial stress and difficulty. But choosing the right option can be challenging, especially if it’s your first time applying for a personal loan.
Still, there’s a good chance that one of the top lenders is a smart fit for you. By comparing interest rates and credit score thresholds, you can be sure to pick a solid personal loan option that’s easy on your wallet and mind.
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