Use This Personal Loan Search Engine to Make Comparing Rates Easy

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You’ve decided you need to take out a personal loan. Maybe you’re consolidating credit card debt, investing in home renovations or starting a small business.

But you’re still not sure how to go about finding the best offer.

The thing is, a personal loan is, well, a personal decision. Each lender and loan varies. There’s no one-size-fits-all option. However, you can use an online personal loan search engine to shop around.

Then, use our personal loan tips below to find your perfect match.

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What’s the Best Personal Loan?

There’s no one-size-fits-all approach to taking out a personal loan, but here’s what you should be looking at when comparing loan offers:

1. Interest Rates

Interest rates, also known as annual percentage rates (APR), fluctuate with the market. At the time we wrote this article, the average interest rate on personal loans was 12.93%, according to a Penny Hoarder analysis of more than 128,000 LendingClub loans. Additionally, as a general rule of thumb, you’ll find lower interest rates if you have a higher credit score.

The best rate is going to be the lowest rate. That means, as you pay down your personal loan, you’ll put more money toward the principal (the amount you borrowed) versus the interest.

You’ll also need to ask yourself: Is the interest rate fixed or variable? A fixed-rate loan means the interest rate won’t change during the lifetime of your loan. A variable rate means it could fluctuate with the market, which is a bit risky.

2. Loan Amount

Next, take a look at the loan amount for which you’ve qualified. Sure, you might want to take out a personal loan for $100,000, but that doesn’t mean you’re going to qualify.

If you’re exploring debt consolidation or want to pay off medical bills and your personal loan offer isn’t cutting it, you might want to look into some alternatives. (See below.)

3. Loan Term

The loan term refers to the life of the loan (the amount of time you have to pay back the money you’ve borrowed).

We typically see personal loan terms range from 24 to 84 months.

As a general guide, the longer your loan term, the lower your monthly payments but the more interest you’ll pay over time. The shorter the term, the higher your monthly payments — but the less interest you’ll pay over time.

Make sure you can afford these monthly payments so you don’t default on your loan (and hurt your credit score). That’s why it might be best to give yourself wiggle room with a longer term, even if it might mean paying more in interest over time.

4. Type of Personal Loan

There are two types of personal loans: secured loans and unsecured loans.

A secured personal loan means you’re using an asset (or collateral) to back the loan. Sometimes, this can result in lower rates, but if you fail to make your payments, you’re risking that asset (e.g. car, home, investments, savings, etc.).

An unsecured personal loan requires no collateral. Interest rates tend to be a bit higher (because the lender is taking more of a risk), but you’re not putting your assets on the line.

The loans you’ll see when shopping through Fiona require no collateral, which means they’re all unsecured options.

5. Fees

Keep an eye out for fees. Lenders might not necessarily wave this information in front of your face (after all, it’s not that alluring), but you could get hit with an application or origination fee just to secure the loan.

An origination fee is like a down payment. It’s money you pay upfront to show the lender you’re less of a risk. This fee is typically a percentage of the amount you’re borrowing.

6. Penalties

The goal is to become debt-free, right? So if down the road you have the money to pay off your loan before the end of your repayment term, you might want to; it’ll help you save money on interest.

However, some lenders might penalize you for that because they’re now losing out on income from the interest you were paying. Before taking out your loan, look into early prepayment penalties. The best loans won’t have any.

7. Reporting On-Time Payments

If you’re making your monthly loan payments on time, you’ll want your lender reporting that positive behavior to the credit bureaus; it could give your credit score a nice boost. However, not all lenders are required to report your on-time payments, so before you secure a loan, be sure to ask.

What Are the Credit Score Requirements for a Personal Loan?

TPH photographer, Tina Russell, in various scenes showing credit card debt, consolidation and bankruptcy on August 14, 2018.
Aileen Perilla/The Penny Hoarder

Credit score requirements for personal loans vary by lender, though you can expect most of them to have a minimum credit score requirement, usually around 600. MoneyLion, for example, requires a 620 credit score.

Not only will your credit score determine if you can qualify, it’ll also determine your interest rate. As a general rule of thumb, the higher your credit score, the lower your interest rate.

And don’t forget some lenders will look at your credit history, too. If you have a defaulted loan or bills in collections, you might not be approved.

If you don’t know what your credit score is — or already know you have bad credit — use a site like Credit Sesame. There, you’ll get a free credit score and “credit report card,” which breaks down exactly what you need to do to increase your score.

We spoke with James Cooper, an Atlanta-based motivational speaker, who raised his credit score nearly 300 points in six months using Credit Sesame. Read more to see exactly how he did it.

Why Do I Have to Provide Personal Information?

Because lenders will need to check your credit score and verify who you are during the loan-application process, you’ll need to provide your Social Security number and other personal identification information. You might also need to supply the lender with proof of employment or annual income.

Then, if approved, you’ll need to provide your bank account information so the money can be transferred into your name.

Because you’re handing over such personal information, make sure you trust your lender. If you’re looking to borrow with a company you’re not familiar with, comb through its online reviews and Better Business Bureau ratings.

You’ll also want to check the application’s URL to make sure you’re applying through the lender’s legitimate site. (Sometimes there are look-alikes with very similar URLs.) And don’t hesitate to hop on a call with a company representative to ask additional questions.

If I Don’t Qualify, Are There Alternatives to Personal Loans?

If you find you can’t qualify for a personal loan, don’t panic just yet. You’ve got plenty of other options. Here are a few we suggest:

  • Balance transfer card: If you want to take out a debt consolidation loan so you can break free from your high-interest credit card, look into a balance transfer card.

This will allow you to transfer some or all of your credit card debt to a balance transfer card, which will have low to no interest rates for the first 12 to 18 months (typically). Doing this will give you some breathing room to pay down your debt without getting tangled in high interest.

  • An unsecured personal line of credit: A personal line of credit is another popular way to borrow money. Rather than getting a lump sum like you would with a personal loan, a personal line of credit allows you to take out as much or as little money as you need over a period of time.

For example, you could be approved for a $10,000 line of credit, but maybe you only need $3,000 for a home improvement project or to start a small business. You’ll simply borrow against that limit then pay off what you borrow through monthly repayments.

  • A peer-to-peer loan: If you’re set on taking out a loan, research peer-to-peer lending options. Popular companies offering these include LendingClub and Prosper.

The perks of peer-to-peer lending are simple: Because you’re borrowing directly from individual lenders, you’re cutting out the middlemen and major fees.

More Resources to Help You Make The Right Decision

Once again, taking out a personal loan is a personal decision. If you’re looking for more resources to help you make the best choice, bookmark these articles:

And if you do take out a personal loan? Don’t forget to build those monthly payments into your budget!

Carson Kohler ([email protected]) is a staff writer at The Penny Hoarder.