How to choose the best personal loan for 2020

In days gone by there was only one option for those seeking a personal loan – the Bank. The application process was long-winded, time consuming and tedious, while comparing rates was like a minefield and fees charged tended to be extremely high.

Today, with the introduction of peer-to-peer lending sites and other online financial institutions it has changed the way we shop for a personal loan, allowing us to build a custom loan without having to go through such a grueling process.

Whenever you’re in a pinch a personal loan is a convenient financial resource you can turn to, as you are not required to pledge any collateral, this unsecured loan is straightforward to apply for and obtain. In fact, some lenders offer instant approval and you can enjoy the full sanction of your personal loan within just 24 hours.

One main benefit of availing of a personal loan is that the sanction has no spending constraints, meaning you can use the funds to meet any financial obligation – from consolidating debt, starting a home improvement project or financing a wedding. Even though competition is high among lenders, there are ways to narrow down the list and help you choose the best personal loan.

Here we outline 4 factors to consider:

Eligibility Check

When looking for the best personal loan in the market, it is always worthwhile searching for a lender who has a simple, easy-to-meet eligibility criteria.  This can speed up the verification and approval process and reduces the effort required to acquire funds.

For example, lender Avant requires borrowers to be over 18 and have U.S. citizenship or permanent residency, ability to prove creditworthiness with a credit score of 580 or higher and a stable and dependable annual income of at least $20,000.00.

In determining your eligibility for personal finance, lenders will consider three main key factors before approving your application: your credit scores and reports, your income and your debt to income ratio.

Compare the Interest Rates

If you are thinking of taking out a personal loan, interest rates are a vital aspect to consider when in search of the best personal loan. These rates directly affect the amount of interest you pay and therefore determine the affordability of the loan. The lender sets personal loan interest rates based on factors such as credit score and repayment ability.

So, it pays to shop around as interest rates vary by lender, but the estimated APR for a borrower with an excellent credit history is 13.9%, 18% for good credit, 21.8% for fair credit, and 27.2% for poor credit.

Ease of Repayment 

When it comes to having the best borrowing experience, it is imperative to have a flexible tenor for repayment. This allows you to spread your monthly repayments over a convenient period, repaying the loan as per what you can afford and limiting the chances of default. In checking affordability, most lenders provide online calculators which will compute your monthly repayments and outline the total interest you will pay towards the loan.

For example, show typical personal loan amounts range from $1,000.00 to $50,000.00, while loan terms range from 12 months to 60 months; a longer loan term results in lower monthly payments, but higher interest rates.

Simpler Process

The newest generation of lenders are focused on making it easy to borrow. Online lenders can tell you instantly whether you’re approved, how much you can borrow, and what your repayments will be. Whereas, traditional banks may offer an online application, but it may take them a little while to come back to you.

Online lenders are also more likely to approve lower credit scores and some use ‘alternative’ information to evaluate your creditworthiness.

All in all, finding the best personal loan can go a long way towards helping you achieve your financial dreams. So, whether your goal is to have that dream kitchen or to get out from under the thumb of onerous credit card debt, a cash infusion from a personal loan may help you build a better future.

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