Applying for a personal loan is an important financial decision.
Generally speaking, a personal loan is an unsecured loan that can be used for everything from consolidating debt to paying for a wedding or an unexpected expense.
Because a personal loan typically has a fixed rate and fixed term, you’ll know exactly how much you’re expected to pay each month and when you will have paid the loan off in full.
In addition to understanding the terms and conditions of any loan you might apply for, there are other questions you should ask when comparing personal loan products. We’ve outlined some key things you’ll want to think about:
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What fees might banks charge for personal loans?
It’s easy to get so caught up in the term, interest rate, and monthly payment that you overlook fees associated with the loan.
Some banks charge an origination fee, such as 1% to 3% percent of the amount borrowed. Depending on the size of the loan and the agreed upon origination fee, this could mean hundreds or thousands of dollars taken out of your loan amount before you receive the funds. If you need a specific amount of cash, you’ll need to adjust your loan to account for an origination fee.
Some lenders charge a prepayment penalty, which is a fee for paying off some or all of your loan early.
When comparing banks and personal loan products, it may be to your benefit to search for those, like Discover® Personal Loans, with no origination fees so you don’t have to pay any money to fund the loan. You may also look for banks with no prepayment penalty so you can consider paying off your loan faster if your situation allows.
When does the payback period begin for a personal loan from a bank?
As with most loans, like for a home or a car, you will begin to repay your personal loan approximately one month after you sign the paperwork. For example, if you sign the loan documents on June 15th, you can expect your first payment to be due somewhere around July 15th.
This can differ slightly from one bank to the next, so be sure to clarify it from the start.
Do I need collateral for a personal loan?
No. One of the biggest benefits of a personal loan is that it’s unsecured. This means you’re not required to put up any collateral in order to receive funds.
With a car loan, for example, your vehicle is the collateral. On a mortgage, your home is the collateral.
Your personal loan lender will not ask for any collateral, which makes for a more time-efficient process.
Is there a minimum amount you can borrow?
Most banks may define a minimum loan amount and it can vary from one institution to the next. Generally, the minimum may be somewhere between $2,500 to $5,000.
Is my bank my best option?
This depends largely on your comfort level with your bank, as well as the personal loan products that it offers. Many online lenders and digital banks, like Discover, offer personal loans. There can be advantages to applying online. Do your research to determine what is best for your situation.
No matter what lender you choose, be sure they have a strong reputation and can provide the level of customer service you need.
How do I get a personal loan from a bank?
Getting a personal loan from a bank has become relatively quick and easy, especially if you can apply online.
It is typically a three-step process:
- Complete an application online, over the phone, or in person (if you’re using your local bank).
- Decide about your desired term (typically 12 to 84 months) and get your interest rate and APR.
- Receive a decision and, if you are approved and accept the terms offered, decide how you want to receive the funds.
Although it can take some time to complete the application and make a final decision, the actual process should be simple so you can put your funds to use quickly.
Discover makes getting a personal loan as easy as 1-2-3.Learn More