A Step-By-Step Guide To Choosing A Personal Loan

stepByStepGuideToChoosingAPersonalLoan
Fiona Staff7/25/2019

In the rapidly expanding online personal loans market, consumers have more options than ever. Instead of filtering all discussions and offers through brick-and-mortar banks, online-only banks offer a broader portfolio of options and many other benefits, including the ease of the application and funding process.

Personal loans can help you navigate around financial roadblocks and smooth over rough patches in finances. With the available funds from a personal loan, you can bridge gaps to celebrate a special occasion, navigate a large purchase or finally make your house a home.

How do you find the right personal loan for you?

1. Decide How Much Money You Need

Unlike credit cards that allow you to spend any amount each month as long as it’s less than your maximum, personal loans give you access to a set amount of cash all at once. As a general rule, financial institutions offer personal loans between $1,000 and $100,000. But if you end up borrowing more than you need, you’ll end up paying for it in the long term with greater interest.

Personal loans accrue interest at a certain rate as a percentage of the total borrowed. If you borrow more money, you’ll pay more to do so over the duration of the loan. Do the math to figure out the minimum amount to borrow in order to cover your expenses —  but don’t drain your bank account to cover home improvements or a destination wedding. In the event of an emergency, you want to still have enough cash to be able to quickly cover unexpected necessary costs without having to take out another loan.

Online platforms like Fiona help you navigate the loan application process to find the best options for your unique needs. Enter personal data into the secure, data-encrypted form to get personalized pre-approved offers from top financial institutions.

Get personal loan offers with Fiona below.
2. Optimize Your Interest Rate

The annual percentage rate (APR) refers to the amount you pay as a percentage of the loan total, including any interest and additional fees. Personal loans usually have rates somewhere between 6% and 36%, depending on the amount and on the applicant’s credit rating.

For example: say you were to borrow $10,000 on a three-year repayment plan with a 10% APR. The monthly payment would be a set amount for the entire duration of the loan: in this case, $323. The longer you pay off the loan, the larger percentage of each monthly payment will bring down the principal instead of just the overall interest. In this case, at the end of the three-year repayment period, you will have paid $1,616.19 in interest.

Compare available offers from different providers to make sure you’re getting the best interest rate possible on your loan. Over the term of repayment, even minor differences in percentages add up.

3. Calculate Your Budget

Most loan repayment terms range from 12 months to 7 years. Financial institutions calculate the monthly payment to remain constant over the full loan duration, covering interest that you’ll owe over that timeframe. At the beginning of your loan, a larger percentage of the monthly payment will go towards interest, but as you near the end of the loan term, more will go towards the principal amount you borrowed.

Compare different offers to see how a range of monthly payments and terms of loan will fit into your budget. A higher monthly payment can help you reduce your overall interest and save money on your personal loan, while a longer term of loan can give you a more manageable monthly payment. 

4. Protect Your Credit Rating

An actual application for a personal loan or a new credit card will trigger a hard pull, which could cause a dip in your credit score. The inquiry will be added to your credit report and signal that you are looking for an additional line of credit, which could temporarily lower your credit rating.

However, searches for pre-approved offers will only trigger a soft pull on your credit, which will not impact your overall credit score. Evaluate pre-qualified offers before putting in an official application to ensure you’re focusing on loans that you’re most likely to be approved for.

5. Find A Convenient Local Option

Online banks offer more flexibility with your schedule and location — you don’t have to travel to a physical bank to fill out paperwork with a loan officer. Instead, search-and-compare platforms like Fiona will show you pre-approved offers. You won’t have to wait weeks to know whether or not you’ll be able to get a loan. Fiona matches you to real-time offers that fit your credit history and your financial situation, with streamlined pre-approval to expedite the process.

As part of your loan search, shop around and compare personal loans online instead of having to settle for one available at your current bank. Real-time offers provide a more accurate picture of whether or not the loan will be a good fit for your specific needs.


You might also be interested in

Unsecured Loans Illustration
Personal Loans

Disclaimer: The material provided on this site is not intended to provide legal, investment, or financial advice or to indicate the suitability of any Engine by MoneyLion product or service to your unique circumstances. For specific advice about your unique circumstances, you may wish to consult a qualified professional. Any information or statistical data sourced by Engine by MoneyLion through hyperlinks, from third-party websites, are provided for informational purposes only. While Engine by MoneyLion finds these sources to be accurate, it does not endorse or guarantee any third-party content.

Fiona Logo
Copyright © 2024 ML Enterprise Inc
ML Enterprise Inc. (formerly Even Financial Inc.) NMLS# 1475872 /
This site is not authorized by the New York State Department of Financial Services. No mortgage solicitation activity or loan applications for properties located in the State of New York can be facilitated through this site.