In a real money emergency, it might feel like you need to pick the first loan you come across. You need fast cash now to cover a burst pipe or chipped tooth. Why would you waste time browsing between your options when your house, health, and money are on the line? But comparing your options isn’t time wasted. It’s part of being financially responsible.
Different lenders offer unique loans with varying terms, interest rates, and repayment options. You can learn about the benefits of each type of loan online by comparing lenders online. More importantly, you can identify the lender offering the most favorable terms that align with your financial situation and repayment capabilities.
7 Steps to Comparing Loans
Go through this list the next time you want to borrow money online.
Step 1: Determine Your Loan Requirements
Before you can start looking at loans, you need to know the bare minimum requirements you need out of a loan. Make note of how much you need to cover your expenses, and how much wiggle room in your budget you have to cover payments.
Speaking of payments, consider the desired repayment terms and any specific features that are important to you, such as flexible payment options or the ability to make early repayments.
Step 2: Research Different Lenders
Now you know what you need, it’s time to search for lenders that offer something that fits these parameters. Go online and type something like “online loans near me” into an Internet search. In a matter of minutes, a search engine will deliver countless financial institutions, banks, and online lenders that fit the bill.
Step 3: Evaluate Interest Rates
Most online lenders will give you the average interest rates and finance charges applied to their products. Take the time to browse their site for any additional fees, such as origination fees, late payment charges, or prepayment penalties that may apply.
For more detailed information, you might have to apply to see what they offer. Don’t accept any offer until you move through the other steps.
Step 4: Analyze Repayment Terms and Conditions
Pay attention to the exact repayment schedule, noting each lender’s term length and the frequency of payments. Timing, frequency, and the size of your payments can affect how much a loan will cost you when you factor in how interest is applied.
Step 5: Examine Total Loan Costs
By law, financial institutions have to share your APR or annual percentage rate. This gives you the total cost of borrowing across all rates and fees. However, you should always make a list of all the fees that make up the APR, including the principal amount, interest charges, and any applicable fees.
Step 6: Compile Your Findings
By now, you’ll have a lot of information floating around in your head. It might be easier to compare these stats by writing them down—either on paper, your phone’s note app, or an Excel spreadsheet. Make an entry for each lender and jot down rates, terms, and overall cost. You’ll also want to include any unique clauses, restrictions, or potential consequences that come with one lender over another.
Step 7: Key Your Findings into a Calculator
Alternatively, you can skip the previous step and key these details into a loan comparison calculator. These apps will do all the number crunching for you and show their findings on an easy-to-read graph. This might be the better option if you’re a visual learner.
Apply These Tips to Your Next Loan
Comparison shopping is crucial in securing the right loan for your financial needs. By evaluating different lenders, interest rates, repayment terms, and total costs, you can make an informed decision that aligns with your goals.
