Shopping Around for the Cheapest Personal LoansPersonal Loans > Personal Loan Articles > Article: Shopping Around for the Cheapest Personal Loans
Be a Smart Borrower
It stands to reason then that we're going to shop around for the cheapest personal loans the same way we'd shop around if we were making the purchases directly from our wallets. This makes sense, right? Unfortunately, many people don't shop around for the cheapest personal loan. They don't have the funds they need to make a purchase so they go to the first lender they see, apply for a loan and take the money and run, without even so much as considering that the lender across the proverbial street may have given them a cheaper personal loan.
What Makes One Loan Cheaper than Another?
It's important to know what makes for a "cheaper loan". When lenders charge you a certain interest rate on your personal loan, it must also be presented as a comparison rate stated in terms of APR or annual percentage rate. The comparison rate is the cost of your loan in terms of a percentage inclusive of all fees and charges with the exception of government and statutory charges, insurance and event based fees (like late fees). For instance there may be other factors to consider besides the actual percentage rate the lender charges you. When you apply for a loan of $50,000, for example, the lender may give you a quote of 12% interest on the loan. Any loan fees the lender may charge you such as a $100 loan origination fee, $20 credit report fee, $30 wire transfer fee, etc., is going to be added to the $50,000, which will increase your APR. So, to make life simple for you, simply look at the comparison rate. This rate represents the true cost of the loan.
Another example of how to make a loan cheaper is with the term. Two customers come to a lender and get a $50,000 loan with an APR of 12%. The first customer agrees to pay his loan off in one year with 12 monthly payments, while the other customer agrees to pay it off in 2.5 years with 30 monthly payments. They've both borrowed the same principal amount at the same interest rate. Yet, the first customer got a much cheaper loan than the second because he'll pay a lot less interest over the term (12 months) of the loan.
Always check the terms of the loan and how the fees are calculated such as; account-keeping fees, annual service fees and late charges. Although you may not ever be late on your payments, find out how much they charge you on late fees and when the fees are assessed.
Shop Around for the Cheapest Personal Loans
Now that you know what makes the cheapest loan, you can begin shopping around. Check the many online lending companies that are willing to give you personal loans. Many of these are from major lenders and can offer you fast and efficient service with excellent rates. If you're doing your business online, read all the fine print you can on their lending policies. If you still have questions, send them an email or call them on the telephone. If they don't have a contact number, don't do business with them. Many customers find they can get their personal loans faster online than if they went to a lenders in their own town.
Check with the many lenders in your area. Generally, credit unions will give you a much better deal on your personal loan in terms of interest rate and additional fees and charges. If you're a member of your credit union, check into their policies regarding personal loans. If you're not a member, you may wish to consider joining for any future financial dealings you may have.
Compare all the costs you'll be charged for doing business with a particular lender in terms of interest, fees and loan terms. If, after shopping around, you've finally found a lender that appears to be the cheapest, make sure it's a reputable lender that you can rely and trust.
I worked in a lender as a loan secretary for many years and handled many loan signings for the lenders. You would be surprised how many of the customers would come in to sign their loan documents and show little interest when I was going over their documents with them before they signed for the loan. Many of them looked bored and totally disinterested in the figures on the paper showing what their "final" APR was and how we came to that figure. All they seemed to care about was signing the documents, getting the check and leaving.
Don't let yourself fall into the category of being one of these people that are only interested in getting the personal loan. Make the lenders give you the best and cheapest personal loans they possibly can. After all, it's your money and it can be spent on a lot of other things other than interest and fees. So, shop around first!
What to do next
Finance Comparison lists a number of highly competitive personal loans that you can apply for online. Simply compare rates, terms and apply online.