Taking out a personal loan can be both exciting and nerve-wracking. You’ll have the opportunity to get what you want or need, but at the same time, you’ll be making a big financial commitment. However, there are ways to ease your fears and make the process smoother by asking the right questions. In this article, we’ll discuss the seven essential questions to ask your personal loan lender before you sign on the dotted line.
1. What is the Interest Rate?
The first and foremost question to ask is the interest rate. The interest rate is the amount you’ll pay on top of the loan amount, and it can significantly impact your total loan cost. Some lenders may advertise low rates, but they may not apply to your credit score or loan amount. Therefore, it’s best to shop around and check the rate with multiple personal loan companies to find the one that offers you the best rate. Additionally, make sure to ask whether the interest rate is fixed or variable. A fixed interest rate will remain the same throughout the loan period, while a variable interest rate can fluctuate.
2. What are the Fees?
Aside from the interest rate, the fees you’ll need to pay can also affect your total loan cost. Therefore, it’s essential to ask your lender about any fees you’ll need to pay and how much they are. Here are some common fees to ask about:
- Origination fees
- Late payment fees
- Prepayment penalties
- Returned payment fees
Not all lenders charge all of these fees, but it’s still essential to know what they are and how much they’ll cost. For example, if you always pay on time, you won’t need to worry about late payment fees. However, if you don’t know how much the fees are, it can be challenging to manage your finances effectively.
3. Do You Offer Any Rate Discounts?
Many personal loan lenders offer rate discounts, such as a slightly lower interest rate if you sign up for autopay. Therefore, it’s worth checking with the lender whether they offer any discounts and what the requirements are. Additionally, some lenders may consider non-traditional information when deciding whether to approve your loan or not. For example, Upstart considers your education when you apply for a loan.
4. How Will I Receive My Money?
Depending on the lender, you may receive your loan amount in different ways, such as a check, cash, or through direct deposit. Therefore, it’s essential to ask your lender how you’ll receive your money and what options are available. If you’re consolidating debt, some lenders may offer to send the funds directly to your creditors.
5. How Long Will it Take to Get My Money?
If you need the money urgently, it’s crucial to know how long it will take to receive the funds. The waiting period can vary depending on the lender, but it’s typically around a few business days. However, some lenders, such as Upstart, offer next-day funding, which can be helpful in emergencies.
6. Do You Report to the Credit Bureaus? Which Ones?
If you’re trying to improve your credit score, paying off a personal loan on time can help. However, this will only be possible if the lender reports your payments to the credit bureaus. Therefore, it’s essential to ask your lender which credit bureaus they report to and whether they report your payments regularly.
7. Are there any other benefits or perks that come with the personal loan?
Aside from the interest rate and fees, some lenders may offer additional benefits or perks that can make their personal loan more appealing than others. For example, some lenders may allow you to choose your own payment due date or offer a skip-a-payment option if you’re facing financial hardship.
Conclusion
While these perks can be helpful in making a decision between two lenders, it’s important to prioritize the loan with the lowest interest rate and fees. Additionally, make sure to carefully read the terms and conditions to understand any potential consequences of using these perks.
Ultimately, by asking these seven key questions, you can gather all the information you need to make an informed decision about which personal loan to choose. Remember to shop around and compare rates from multiple lenders, and always read the fine print before signing on the dotted line.