Applying for a personal loan is an important financial decision.
There are a lot of details to consider, so you may want to take the time to compare your options with the goal of making the best possible choice.
With 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.
Even though the terms and conditions of a personal loan can be straightforward, there are many key questions to answer before signing on the dotted line.
What Banks Offer the Lowest Fees 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 one to three 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 out of your pocket upfront.
Some lenders charge a prepayment penalty, 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, with no origination fees so you don’t have to pay any money to fund the loan and no prepayment penalty so you can consider paying off your loan faster, if you can.
When Does the Payback Period Begin for a Personal Loan from a Bank?
Just the same as the majority of loans, such as one for a home or car, you will begin to repay your personal loan approximately one month after you sign the paperwork.
So, 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.
Tip: you may be able to request a specific due date if something in particular works best for your budget.
What Collateral Do You Use?
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. Same with a home mortgage.
Your personal loan lender will not ask for any collateral, which makes for a more time efficient process.
Is there a Minimum Amount to Borrow?
Most banks may define a minimum loan amount and it can vary from one institution to the next. Generally speaking, the minimum may be somewhere in the $2,500 to $5,000 range.
Is My Bank the Best Option?
This depends largely on your comfort level with your bank, as well as the personal loan products that it offers.
There are also a number of fintech lenders that you may compare to a bank.
You just want to make sure whoever you borrow from has a strong reputation and can provide the level of customer service you need.
How Do You Get a Personal Loan from a Bank?
If you come to the conclusion that a personal loan is your best option, you’ll want to learn more about the application process.
With the help of the internet, getting a personal loan from a bank has become relatively quick and easy.
It is typically a three step process:
- Complete an application online, over the phone, or in person (if you’re using your local bank).
- Make a decision in regards to the term (typically 12 to 84 months) and receive your interest rate.
- Receive a decision and, if you approve 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 and to the point.