Personal loans: rates, fees and how to compare offers
A personal loan gives you a lump sum that you repay in fixed monthly installments over a set term. Most are unsecured, which means no collateral is required.
APR is the number to compare
The annual percentage rate (APR) includes the interest rate and most fees, such as origination fees. Two loans with the same interest rate can have different APRs once fees are included.
What lenders look at
- Credit score and credit history
- Income and employment
- Debt-to-income ratio
- Existing relationship with the lender
Many lenders offer prequalification with a soft credit check, which shows likely rates without affecting your score.
Bad credit options
Lenders that accept lower credit scores usually charge much higher APRs. Compare total repayment cost, and be cautious of lenders that guarantee approval or ask for fees upfront.
Debt consolidation
Consolidating several debts into one loan can lower your interest cost if the new APR is lower than what you pay now. It only helps if you avoid building new balances on the cards you paid off.
Small business loans
Business lenders look at time in business, revenue and the owner’s credit. Options include term loans, lines of credit and SBA-backed loans, which often have longer terms but more paperwork.
Before you sign
Check the APR, total amount repayable, any prepayment penalty, and late fees. Only borrow an amount whose monthly payment fits comfortably in your budget.