How to Choose the Best Personal Lender


Personal loans are offered by banks, credit unions and online lenders. Several options are available, but not all are worth considering. More importantly, some lenders offer more attractive personal loan products than others. Lenders will also offer applicants different rates depending on the financial situation of the potential borrower.

To find the best personal lender for you, you need to shop around and evaluate the types of loans offered by each lender. You’ll need to consider APRs, fees, and the overall experience you can expect as a customer to make an informed decision.

Why it’s important to shop around for lenders

It’s essential that you shop around with multiple lenders to ensure you get the best deal on a personal loan. If you settle for a loan with the first lender you find, you could get a significantly higher interest rate than you would get elsewhere. You could receive a monthly payment that stretches your budget and you could pay several hundred or thousands of dollars more in interest over the life of the loan.

Many lenders allow you to get pre-qualified online in minutes. You can view loan estimates without impacting your credit score and compare them to other personal loans you are considering. This can help you find the cheapest loan.

What factors to use to evaluate lenders

When comparing personal loan options, you want to assess the reputation of the lender as well as the interest rates and fees they charge. It is also important to consider the types of loans offered, as some may not be suitable for you.

Loan APR

The interest rate, or cost of borrowing, is generally determined by your credit score and the term of the loan. Lenders tend to advertise a low interest rate to attract customers. However, the lowest rates are usually reserved for customers with excellent credit. A good credit score could also get you competitive interest.

If you have less than perfect credit, you can expect to pay more interest. So, you should look for lenders who consider other factors, like your work history or education, to have a better chance of getting a personal loan with a competitive interest rate.


Does the lender charge an application, origination or prepayment fee? Depending on how much you borrow, these costs can add up quite quickly, even though they are built into the loan.

To illustrate, suppose you get three quotes for a $10,000 loan. The first lender charges an origination fee of 8%, while the other two charge 6% and 2% respectively. You’ll pay $800, $600, or $200 plus principal and interest, depending on the personal loan you choose.

Many lenders offer personal loans with no application or set-up fees and won’t charge you a penalty if you repay your loan early. But these aren’t the only fees to consider – review the fee schedule to determine how much the lender charges for late or returned payments.

Don’t let fees disqualify a certain lender, though. In some cases, the loan fees could be lower even if you have to pay a fee.

Client experience

What are the opening hours of the lenders you are considering? Are they available by phone, email or chat? Can you visit a physical location for assistance? These are just a few questions to think about when evaluating lenders to determine if they are easily accessible.

Types of loans offered

Do you have a specific goal for the loan or will you use the funds to get back on track financially? Lenders generally do not limit how funds can be used. However, personal loans are either secured (or require collateral for approval) or unsecured. They also come with a fixed rate that remains constant or a variable interest rate that changes over time, and many are marketed for a specific purpose. Common categories include:

  • Loans for bad credit are offered by lenders to customers with past credit problems
  • Debt consolidation loans allow you to pay off multiple debts with a new loan, usually with a lower interest rate, and streamline the repayment process by making one monthly payment
  • Emergency loans are designed to cover unforeseen expenses and last-minute financial emergencies
  • Home improvement loans are used to make costly improvements to your home without tapping into the equity you have accumulated

How to choose the best lender for you

Ultimately, the answer of the best lender for you comes down to the reputation of the lender and the loan terms they offer. Although your credit score and general financial history determine whether you qualify for a loan, you want to get quotes from several lenders and assess the interest rate and fees. It is also important that the lender has a reputation for providing exceptional customer service to past and current customers.

Before applying for a loan, analyze the numbers to make sure you are making an informed decision. Higher loan origination fees do not mean the lender is not worth considering, especially if the interest rate is low and vice versa. A personal loan from a lender that is not reputable or offers disappointing customer service could be even more expensive.

With some research and time, you can sort through the best personal lenders to find the best one for your situation.


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