The Anatomy Of A Perfect Personal Loan
Not all personal loans are created equal and you’ll find that the best ones are those which allow you to reach your financial goals as responsibly as possible. Aside from the standard month-to-month cost and interest rate of your loan, there are plenty of important aspects to consider in your search for the best.
So whether you’re looking to pay off your debt or fund some new home renovations, these factors will help you compare the competition against one another so you can quickly find the perfect personal loan for you.
The Perfect Personal Loan Is Low Cost
While striving to get a low-cost personal loan may seem like a no-brainer, there are many factors that go into it that borrowers are not always aware of. Many prospective borrowers will simply compare a loan's monthly installments to the installments of other loans, for example. While this is a decent metric, the monthly payments aren't representative of all of the costs associated with getting a loan—you also have to pay attention to things like interest rates and application fees.
An easy way to tell if these two factors are low is to look at a loan's Annual Percentage Rate (APR). The APR is a percentage that combines the interest rate with all the associated fees.
While factoring in your monthly payments along with your potential APR will ensure that you aren't surprised by any hidden fees, you can also secure lower interest rates by improving your credit score. Applicants with the lowest credit score will have the easiest time securing a loan as well as keeping the cost minimal.
The Perfect Personal Loan Is Backed by a Reputable Company
The age of the internet has made the process of securing the best personal loan infinitely easier, with loan shoppers now having a wealth of options to choose from. With it, however, has also come an increase in dubious providers looking to take advantage of borrowers—especially those with lower credit scores—but there are a few red flags to watch out for that will help keep you and your finances safe from scams.
Legitimate loan providers, for example, will always check your credit score and use it to inform you of your loan repayment plan. If a lender doesn’t run a check, that’s not a good sign. It also doesn’t bode well if the lender is pushy—asking for upfront fees, giving you deadlines on when you can apply, and trying to create a sense of urgency about taking out a loan.
The Perfect Personal Loan Will Come With Benefits
The best personal loans should also come with benefits and features that go beyond the standard loan, such as a stellar customer support team. A dedicated support team can help answer any questions you have about the loan process, find the right loan for you, work with you on payments, and so on.
The best personal loan providers will also offer resources to help their customers make sound financial decisions, such as a dedicated Resources Center with informed articles on important financial topics. Some loan providers even offer personal loan and debt consolidation calculators that can ease the process of preparing and shopping for a loan.
These kinds of resources go above and beyond by equipping borrowers with the tools they need to stay in control of their finances and find the best solutions.
The Perfect Personal Loan Should Be Right For You
And last but not least, the perfect personal loan should be, well, personal. Knowing the kind of personal loan that you need, what you need it for, how long you need to pay it back, and how much you can afford to pay monthly will all play into what makes a loan right or wrong for you as a borrower. Some borrowers may prefer automatic monthly payments, while others will want to remain in control of the payments they make.
There are also different kinds of personal loans that are better suited to different borrowers. Secured loans are personal loans that hold something of the borrower's at stake—such as a mortgage or vehicle—while unsecured loans do not. Secured loans generally have lower interest rates and easier approval processes, making them more ideal for borrowers with lower credit scores. Unsecured loans are just the opposite—slightly higher interest rates with a more restrictive application process, better suited for borrowers with higher credit scores.
How To Find The Perfect Personal Loan
Now that you know what goes into making the perfect personal loan, how do you find it? First and foremost, you need to know what you can afford to pay on a month-by-month basis. If you don't already have a monthly budget, create one before you begin applying for loans. This will let you know how much cash you have left over each month to comfortably repay a personal loan.
Once you know how much you can afford to pay on a personal loan each month, the next best piece of advice is to take your time. Unless you're in a rush to get a loan, there's no reason not to slow down, do plenty of research and planning, and compare multiple providers against one another.
If you have a low credit score, you can also use this time to work on raising your score so that you can get the best rates possible. While it may be tempting, don’t jump on the first loan that you are approved for. Hold out for the one that will benefit you and your financial situation the most.
The Bottom Line
The truth is, there is no single, perfect personal loan that everyone should be running to apply for. What makes a loan “perfect” largely depends on your own personal financial standing along with everything else we covered in this article, like fees, benefits, and features of a provider.
So long as you keep these factors in mind and do your research, a personal loan can be one of the best financial decisions you make.
Please consult with your attorney, financial consultant/planner, accountant, and/or tax advisor for advice concerning your particular circumstances. The information contained herein is for general informational and educational purposes only and should not be construed as professional, tax, financial or legal advice or a legal opinion on specific facts or circumstances. The information or opinions contained herein should not be construed by any consumer and/or prospective client as an offer to sell or the solicitation of an offer to buy any particular product or service.