Online personal loans can make it easier for borrowers to access the money they need without paying high interest rates or dealing with banks. Before you choose an online personal loan, though, you will need to know several things that help you pick an option that works well for you.
Several Apps Will Connect You to Lenders
Some of the most popular apps that you can use to find personal loans are:
Each app has its own pros and cons. Prosper, for instance, is known for its affordable fees. Upstart gets excellent reviews for its low interest rates, solid reputation and high lending limits. LendingClub has a quick funding speed that works well for people in emergency situations.
Explore each of these apps so you can decide which one is right for your needs.
Interest Rates, Fees and Penalties
Interest rates can vary considerably depending on which online personal lending app you choose. Prosper and Lending Club have rates that start at just 5.99 percent. Depending on your credit rating, though, they could charge as much as 35.99 percent. Upstart’s interest rate starts at 7.43 percent, but it maxes out at 29.99 percent, so it’s a good option for people with less-than-perfect credit scores.
When comparing offers, you also need to consider what fees and penalties the companies charge. Popular fees include:
- Origination fees that pay the online company for finding a loan for you.
- Prepayment fees that charge you for repaying your balance early.
- Check-processing fees.
- Late payment fees when you miss your payment deadlines.
Even a low-interest offer could become expensive when you include origination, processing, prepayment and other fees. When you compare offers, make sure you include fees and penalties. Otherwise, you could mistakenly choose a loan that costs more than you think.
A loan’s term simply refers to how long you have to repay the money you borrow. When you borrow money to purchase a house, you can usually choose a term between 10 and 30 years. Online personal loans, however, usually have shorter terms between one and seven years.
If you can repay a loan quickly, it makes sense to choose a shorter term. The sooner you can repay the loan, the less money you will spend on interest. Make sure, however, that you don’t get charged extra for repaying your loan early.
Most online personal loans come from peer-to-peer lending networks. While this arrangement can make it easier for you to access money, it also means that you may need to compare a lot of offers. As long as you take a logical approach, you should be able to choose an online personal loan that works for you.