Why it's good to compare personal loans

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If you're planning to take out a personal loan, make sure to find a lender that offers the best deal possible. This significantly helps you in receiving the best loan offer, which also makes it easier for you to pay it off and become debt-free.

Finding the right loan may not always be as simple as it sounds, though, because you have so many things to think about, especially when deciding which lender to borrow money from.

Even though comparison-shopping of personal loans may not be fun, it's undoubtedly worth your time. Here are five good reasons to compare personal loans.

1 - It helps you get the lowest interest rate

Many different lenders are offering personal loans. There's the credit unions, the national banks, the local banks, and the online lenders.

It's essential to note that interest rates vary from one lender to another, so it's imperative to shop and get multiple quotes.

Aim for a minimum of at least three quotes from different loan providers. You can even go for more if you can to make sure that you won't miss out on a loan offer with the least interest rate.

2 - It helps you enjoy shorter repayments

The longer the time it takes for you to repay the loan, the higher the annual percentage rate will be. Shorter loan terms, on the other hand, lower the annual percentage rate by reducing the interest amount that accrues on your balance. That said, it would be best to find a personal loan provider that offers the shortest loan term possible.

3 - It helps you avoid hard credit inquiries

Applying for a personal loan can sometimes mean a hard inquiry gets placed on your credit report. But, as you probably already know, too many hard inquiries won't do good and can only hurt your credit score. It's also essential to note that these inquiries stay on the credit report for a long time - up to three years.

The good news is that there are still lenders that allow a borrower to get pre-approved for a personal loan. It will enable you to find out your terms and rate before the loan provider performs a hard inquiry on your record.

All you need to do is to provide basic information like your Social Security number. The lender will then conduct a soft inquiry, then tell you what interest rate you've qualified for. You can then decide if you want to continue with your application at this point. Once you opt to move forward, the lender will place a hard inquiry on your credit report.

By comparing personal loan offers, you'll know which lenders from your list provide soft inquiries to their clients. Of course, you want to choose one that offers soft inquiry instead of going for a loan provider that immediately places a hard inquiry on your credit report.

That said, comparing personal loans gives you a chance to find the best deal while protecting your credit score.

4 - It helps you get away from the hassle of finding a co-signer

Some personal loan providers require you to have a co-signer when applying for a loan, while others don't. If you have a less-than-perfect credit score, then a consigner will be of great help and will make a significant difference in the rate that you'll receive.

The problem is that finding a co-signer isn't as easy as it seems. Some people just aren't open to the idea of becoming a consigner since once you fail to make the necessary payments, they'll be the ones legally responsible for settling the balance.

That said, compare personal loans and find an offer that gives you a higher chance of being approved despite having bad credit and even without a co-signer.

5 - It helps you receive special deals

Some personal loan companies offer exclusive deals to borrowers who can meet specific criteria. An excellent example would be the rate discount that lenders provide to people with good credit scores.

Special deals also go to borrowers who are okay with setting up automatic loan payments from their savings or checking accounts.

However, other lenders don't offer these perks, so you have to compare personal loans and be sure to get one that comes with exclusive deals, especially if you think you're qualified to receive some.

Conclusion

Realistically, the ability of a borrower to obtain a better deal is limited by his willingness to shop around. It's probably not ideal applying for a hundred different loans, but getting a quote from at least three different loan providers will give you a clear idea of what you're likely to get from the deal.

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