Applying for a personal loan is an important financial decision.
Since there are so many details to consider, you may want to take your time as you compare your options with the idea of making the best possible decision.
With a fixed rate and fixed term, you’ll know exactly how much you’re expected to pay each month.
Even though the terms and conditions of a personal loan are 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.
When comparing banks and personal loan products, search for those with no origination fees.
Discover, for example, has no origination fees, meaning you don’t have to pay any money to fund 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.
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 back to the next, so it’s something to discuss upfront.
Tip: you may be able to request a specific due date if something in particular works best for your budget.
Should I Take Out a Personal Loan for $4k – $5K for a Car?
Auto loan rates tend to be considerably lower than the rates for a personal loan.
While people may choose to use a personal loan for car or boat repairs, it’s probably not appropriate to use this product to buy a car.
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.
Getting a personal loan from a bank 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 approved decide how you want to receive the funds (this can be done as quickly as one business day)
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.
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?
This varies from one bank to the next, but most have a minimum amount that you must borrow.
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.