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What’s Most Important When Choosing a Personal Loan?

Woman Choosing a Personal Loan Based On The Lender’s Credibility- Thumbnail

According to an independent, national survey of 2,000 adult consumers, the most important factors when choosing a personal loan are overwhelmingly the trustworthiness of the lender and interest rates. In fact, 78 percent of adults indicated that those two factors—trustworthiness and interest rates—were the top reasons for selecting a personal loan provider.

Survey Results Showing What Factors Impact Getting A Personal Loan

Trustworthiness of the Lender

People look for personal loan lenders they can trust. While a competitive interest rate typically factors into a borrower’s decision, the majority of survey respondents would evaluate potential lenders on more than just proposed rates. They want a lender who can guide them through the application process, alleviate stress by providing clarity during the origination of the loan, and then be available throughout the life of the loan to answer questions. Don’t forget, when you get a personal loan, you are entering into a multi-year relationship from start to payoff with a lender.

Getting a personal loan is a decision that can affect your financial future, so many consumers agree that it’s important to fully and easily understand the terms of their loan. This is another possible reason why the trustworthiness of the lender was so important to survey respondents. Consumers are looking for full transparency and clarity from their lender when considering their loan provider.

The fine print of some lenders may include hundreds or even thousands of extra dollars in cost due to variable interest rates or origination costs depending on the size of the loan. Check if a lender, for example, has fees, like origination fees or closing costs.

Interest Rates

If you compare the cost of having multiple high-interest bills to one lower interest personal loan, the math simply makes sense. If the combined interest rate on your higher-interest debt, such as credit cards or department store cards, is higher than a personal loan, it is wise to consolidate into a personal loan to save money.

Fixed interest rates are important as well so your monthly payment won’t change. Obtaining a lower rate can mean significant savings for you—especially when you compare the lower, fixed rate to the average variable rates of revolving debts.

Total APR

Customers should consider the total APR, not just interest rate. According to the Consumer Financial Protection Bureau, an annual percentage rate is a “broader measure of the cost to you of borrowing money. The APR reflects not only the interest rate, but also the points, fees, and other charges that you have to pay to get the loan.” The APR is often higher than your interest rate because some lenders add origination or other fees to your loan.

Fixed APR rates at Discover range from just 6.99% to 24.99% depending on the creditworthiness at the time of your application.

Origination Fees

It’s a good idea for loan seekers to check if their lender charges any origination fees and know the exact percentage charged.

An origination fee is exactly what it sounds like, a fee charged by a lender upon entering into a loan agreement. It’s a fee just for taking out a loan! It’s important to learn if a lender charges any origination fees and know the exact percentage charged. Discover Personal Loans doesn’t charge an origination fee. Plus, there are no additional fees as long as you pay on time.

So how much could be added to the overall cost of a personal loan if it has origination fees? It could be hundreds or even thousands depending on the size.

Overall, survey respondents say that in addition to low interest rates, it’s important to find a trustworthy lender.  To learn more, see the Rasmussen Reports survey results yourself.