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Union Bank® Personal Loans

7 things to look for when getting a personal loan

Did you know that 22% of U.S. adults have a personal loan? Personally, that figure seems low to me considering the benefits that personal loans can provide, such as consolidating debt or paying it down faster, enjoying a lower monthly payment and appreciating predictable monthly payments with a fixed-end date. Importantly, it has also become easier than ever to apply and qualify for flexible loan options, both with online lenders and traditional banks.  

Despite the advantages of personal loans and ease of accessibility, it’s smart to perform due diligence when comparing personal loans. Specifically, you should be looking at the following seven features. 

1. Minimum loan amount. 

The amount of a personal loan usually ranges from $1,000 to $3,500. But, that depends on the specific lender. Generally, the biggest lenders won’t go lower than a thousand dollars. There are even some lenders who will only lend a minimum loan amount of $5,000 — if not more. 

If you need a smaller loan, like an amount lower than $1,000, you may be better off borrowing the money from a friend or family member. Or, if it’s not an emergency, you could just save the extra cash. 

2. Interest rate and APR.

You're going to pay an interest rate based on the amount you're borrowing. And, this rate determines how much your total loan will cost you in the end. Personal loans typically have interest rates ranging from 10%-28%. However, this can vary depending on factors like inflation and the current demand for credit.

In addition to the interest rate, your loan offer may also contain an annual percentage rate or APR. The APR includes the interest rate plus loan fees. As such, this can give you a clearer picture of the true cost of the loan. 

Also, APRs can vary widely depending on your credit score. The interest rates on personal loans are typically between 9% and 13% for individuals with excellent credit, which is defined as a score of 720 to 850 on a FICO credit report, notes ValuePenquin. Many of these customers may even qualify for lower interest rates.

Generally, APRs on personal loans will approach or eclipse 30.00% for those with average to poor credit. When your credit score is below 580 or you have no credit history, you may not be eligible for a conventional loan.

It's also important to pay attention to the interest type: Is it fixed or variable? Fixed rates will remain constant throughout the loan term, while the interest rate on a variable loan may fluctuate over time, possibly increasing.

Bonus tip: You may be able to receive rate discounts if you’re a preexisting customer or set up automatic payments. 

3. Fees. 

Almost any loan offer will include fees, which can add up over time. Listed below are a few fees you should watch for. 

  • Origination fee. Lenders may charge you an upfront fee to process your loan. An origination fee can range from 1% to 8% of the loan and is typically deducted from the money you receive. As an example, you would receive $4,950 on a $5,000 personal loan if there was a 1% origination fee.
  • Prepayment penalty. Paying off your loan early may incur prepayment penalties from your lender. You should be aware of this if you plan to pay off your loan ahead of time or anticipate a cash windfall, such as an inheritance.
  • Late-payment fee. Check if your lender charges a late fee if you have trouble making payments on time.
  • Insufficient-funds fee. You should also find out if you'll be charged an insufficient funds fee if you don’t have enough money to cover the loan payment. 

Fees can become another expense and cause unneeded stress. Be sure you know what fees you’re going to pay before you get started.

4. Collateral.

The fact that a personal loan is unsecured is one of the most significant benefits. In other words, you do not have to put up any collateral to secure the loan. A car loan, for example, is secured by the car, while mortgages are backed by your home. 

Since there is no need to obtain any collateral for your personal loan, the process is faster and more efficient.

5. Flexibility of loan terms. 

Your monthly payment is determined by the length of your loan's repayment period. As such, longer repayment terms typically mean lower monthly payments. On the downside, you will pay more interest in the long run.

To keep interest costs low, choose a repayment timeline that allows you to make affordable monthly payments. Most loan companies require monthly payments to be paid within 30 days of receiving the loan. And, repayment terms typically range from six months to seven years. 

It’s also in your best interest to ask the lender what would happen if you ran into financial difficulties, like losing your job. If this causes you to miss a payment or potentially several payments, will the lender offer flexible options like extending the loan or deferring payments? 

6. Access to funds. 

Some lenders deliver funds electronically on the same day you are approved. Other lenders need up to 10 business days. If quick access to money is important for your situation, be sure to select lenders with fast delivery. If you want things to go as quickly as possible, get the important documents like W-2s, pay stubs, and proof of address together before you apply.

7. Customer experience. 

Look for a company that treats you well, makes it easy to apply in person or online quickly, and is available for questions by phone 7 days a week. In addition to stellar customer service, you may also want to work with a lender that permits autopay or loan management via their website or app. And, always double-check that there aren’t complaints on the Better Business Bureau or Consumer Financial Protection Bureau websites.


This article was written by Jaime Catmull from Forbes and was legally licensed through the Industry Dive publisher network. Please direct all licensing questions to