5 Things to Know When Looking for Personal Loans

If you find yourself looking for personal loans, you’ll want to do some research to ensure you are getting the better options available to you. It’s easy to compare when you know what to look for.

While you might think that interest rates are how to shop and compare what might be the right loan for you, there’s actually a little more to it than that.

Finding out a few things to know about how to choose personal loans in Canada can not only help you with making the right choice, but it could save you a lot in the long run.

Before Your Start

Before you go loan shopping, you want to know what your credit score situation is. This will give you an idea of what kind of interest rates you might be able to find. Depending what your score is, you might find that you are not far from the next tier or cut off point that could allow for better offers and rates.

This can be especially true if your current score is considered fair. There are a number of situations where improving your credit score could save you a significant sum in interest payment. Since it can take a little bit of time, unless you need the money immediately, this is worth considering. But either way, you should still know your score before you start looking.

RELATED: How to Improve Your Credit Score Before Applying For Personal Loans

Where to Start

While online lending can be your best option at times, it can be worthwhile to check what your bank or credit union might be able to offer for rates and fees. This can be especially true if you have been with your bank or credit union for a while and have a relationship.

When shopping around for loans it’s always wise to start with your own bank, but that doesn’t mean they’re the only choice. The number of options with online lenders continues to grow and some of them have offers that the banks can’t always compete with.

What Can I Afford?

Before you start planning how you might spend your loan, you should determine what amount is feasible and what you might be able to afford. This is a monthly commitment, and one that will probably be for a few years.

Some prefer the lowest monthly payments they can get, and will choose a longer term to pay back their loan. Others prefer to pay less interest and will take a shorter term with higher monthly payments.

You want to find the right balance where your monthly payments work for you in the best possible way, while still paying off your loan as quickly as possible.

RELATED: How to Get a Loan with Bad Credit

What About Fees

When you borrow, you want to look at more than just interest rates and APR fees. You want to watch for other fees that might not seem like an issue today, but could be later.

There’s all kinds of fees possible when it comes to loans, and while not all will be a concern to everyone, it’s important to know all potential current and future costs associated with a loan. This can include things like prepayment penalty fees, Late payment fees, Application fees, Returned check fees, and Origination fees, to name a few.

Loan Alternatives

If you were thinking about a personal loan for debt consolidation, sometimes a 0% balance transfer with credit cards can be a good option, but there’s a catch. For this to work in your favor it is important that you would be able to pay off the balance on the card before the intro period is over, and that you are charged a standard interest rate.

Before You Sign

Be sure you understand all costs involved with a personal loan before signing. Lenders must disclose all of the charges upfront, so when you find a loan that looks like it might be right for you, be sure to read the terms and fine print.

RELATED: Does Applying for a Personal Loan Affect My Credit Score

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