Overview
Whether you want to buy a house, modernize your kitchen, fund a wedding, or go on a dream vacation, a loan can come in handy. Fortunately, there is no shortage of products at your disposal. Banks, credit unions, and online lenders all offer a variety of loans, each with its own purpose, qualification requirements, interest rates, terms, and features.
While it might be tempting to go with the first loan you find, it’s a good idea to shop around and compare your options. By doing so, you’ll be more likely to secure a loan with a competitive rate, flexible terms, fewer fees, and the features that are most important to you.
Below, we’ll explore what you need to consider as you scour the market and search for a loan.
Key Takeaways:
Before you compare loan offers, understand your goals and credit situation.
Prequalifying with at least three lenders can help you assess loan offers—without worrying about any negative impact to your credit.
To find the right loan, consider interest rates, terms, fees, features, collateral criteria, and lender reputation.
How to Compare Loan Offers: 6 Easy Steps
Once you decide you’re in the market for a loan, follow these steps to compare your options and hone in on the best one for your particular risk tolerance, finances, and goals.
1. Specify your goals
First and foremost, decide what you want to accomplish with a loan. Maybe you hope to buy a home or a car. Or perhaps you’d like to cover a home addition, fund your child’s education, or launch a business. Clarify what you plan to do with the loan funds once you receive them.
2. Understand your credit
Next, determine where you stand creditwise. You can use free credit monitoring tools you find online or through your credit card company. Your credit will give you a better idea of what types of loans you may qualify for.
3. Do your research
Now, look into loans at various banks, credit unions, and online lenders. You can start with your current financial institution and move on to other lenders you learn about online or through your social network. Note that reputable lenders clearly display their eligibility requirements, rates, terms, fees, and other features online. Focus on the loans whose criteria you can meet.
4. Get prequalified
These days, many lenders let you prequalify for a loan on their website without any impact to your credit score. All you have to do is fill out a short form with basic details about yourself and your desired loan. A prequalification can inform you of the types of rates and terms you may secure if you formally apply for a loan. If possible, prequalify with at least three lenders.
5. Compare your options
Once you have a couple of prequalification offers on hand, take a close look at the following:
Rates: A lower rate can save you thousands of dollars over the life of your loan.
Terms: While longer terms mean lower monthly payments and more interest, shorter terms result in higher payments but less interest over time.
Funding times: Some lenders will disperse your funds the day you get approved or the next business day, while others will take a few business days or even weeks or months.
Fees: Common loan fees to watch out for include application fees, origination fees, late payment fees, and appraisal fees.
Collateral requirements: If you’re in search of a secured loan, such as a mortgage, home equity loan, or car loan, understand the collateral criteria and the fact that the lender may seize your house, car, or other asset in the event of default.
Features: Look for unique loan features that may be useful to you, such as free credit card monitoring, hardship repayment plans, flexible due dates, and autopay or loyalty discounts.
Service and reputation: Not all lenders are created equal. Use third-party review sites like Trustpilot and Better Business Bureau (BBB) to get an idea of each lender’s customer service and reputation.
6. Choose your loan
Now that you’ve done the heavy lifting, it’s time to pick your loan. Remember that while a lower rate is a huge plus, it’s not everything. Sometimes, a lender with better service, flexible terms, and more perks is a better fit than the one with the best rate. Once you make your decision, you can go ahead and formally apply for the loan online, via phone, or in person at a nearby location, depending on the lender.
Weigh Your Options and Reap the Benefits Later On
While it might take some time and effort to shop around and compare loan offers, doing so is essential for your long-term financial success. This process can increase your chances of a flexible loan with more competitive rates, favorable terms, and useful features. It may also save you a great deal of money and headaches down the road.
by your friends at The Daily Navigator
