10 Key Questions You Should Ask Before Getting a Personal Loan

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When you shop around for your first personal loan, it’s important to put in the same legwork you would with any major purchase. After all, you wouldn’t walk into a car dealership without knowing what kind of car you want, right?

That’s why you need to figure out how to get a personal loan that’s the perfect fit for you before signing on the dotted line. Make sure you ask yourself the following 10 questions to avoid any confusion or expensive mishaps along the way.

1. What do I need this personal loan for?

Perhaps you need a personal loan for consolidating debt, financing an emergency purchase, or funding much-needed home improvements.

Being clear on the purpose of your personal loan is the first step toward making key decisions, including how much you’ll borrow and whether you need a personal loan in the first place.

Lenders will ask you to state how you plan to use the funds on your personal loan application, and you’ll need to answer honestly.

Most of the time, your reason for getting a personal loan will have little or no impact on your application. However, some lenders do limit how borrowers can use loans. Payoff, for example, offers personal loans designed to help borrowers consolidate and pay off credit card debt.

2. How much do I need to borrow?

Add up all the costs you would like to cover with your personal loan and limit your loan balance to that amount.

There’s no need to tack on an extra $5,000 simply because you like the idea of having more cash on hand. It’ll make your loan more costly and increase your chances of delinquency or default.

Knowing how much money you need also will help you choose a lender, as most lenders have a set minimum and maximum for personal loans.

If you need a small personal loan, lenders such as Upstart offer loans as low as $1,000 and Avant as $2,000. Or you can borrow as much as $100,000 with a SoFi personal loan.

3. How much can I afford?

As you figure out how much to borrow, you also should think about how big of a loan you can afford to repay.

Remember: The bigger your personal loan, the higher your monthly installment payments will be. You’ll also pay more in interest and origination fees.

Here’s how to get a personal loan you can afford:

  • Review your budget and monthly cash flow.
  • Figure out if you usually have money left over after you cover your bills each month.
  • Identify how much you can devote to covering payments on a new debt.
  • Look for areas where you could lower your costs and make more room in your budget before seeking a personal loan.
  • Weigh your need for a personal loan against other financial goals.
  • Weigh other expenses or goals against your need for a personal loan to decide which choice matches your priorities.

4. How long will I be repaying this personal loan?

Your personal loan repayment term is the number of months or years over which you’ll repay the debt. Repayment terms typically range from one year to 10 years or more.

If your primary concern is keeping total costs low, then you should get a personal loan with a shorter term. When you choose loans with shorter terms, you pay less interest and get out of debt faster. Plus, most lenders charge lower interest rates on shorter personal loan terms.

However, you also want to be sure your monthly costs are affordable. The length of your loan directly affects how high your monthly payments are. You’ll want to choose a term that results in affordable payments, based on the amount you plan to borrow.

For example, let’s say you’re borrowing $10,000 at 8.00% interest and repaying it over five years. You’ll end up with an affordable monthly payment of $203.

But if you repay that $10,000 over three years with a 6.00% interest rate, your payments will be $304 a month. That monthly payment could be less manageable, but the combination of a lower rate and shorter loan term will save you $1,214 in total interest costs.

You can use our calculator below to estimate your monthly loan payments.

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5. What’s my credit like?

Before you apply for a personal loan, find out what your credit score is. This information will help you get a personal loan with the best interest rate and choose a lender with credit requirements that match your credit history.

Here’s what you need to keep in mind when it comes to credit scores and personal loans:

  • Credit scores under 580 are unlikely to qualify you for a personal loan. You might need to look into other options, such as applying for a secured loan or adding a co-signer.
  • Credit scores of 580 to 680 are considered fair or average. If you’re in this range, choose a lender with care. Consider applying for personal loans for fair credit to increase your chances of approval.
  • Credit scores of 680 or higher will give you the best chances of personal loan approval. In this range, your good or excellent credit also will earn you lower interest rates and origination fees.

Always check credit requirements from lenders to ensure you qualify.

6. Will I need a co-signer?

A key consideration is whether you need to apply for a personal loan with a co-applicant.

A co-applicant, such as a co-borrower or co-signer, is a second person who applies for a loan with you. What’s more, your co-applicant agrees to be responsible for repayment if you’re unable to make payments.

Many borrowers apply for a personal loan with a co-signer to improve their chances of approval. That’s because you can use the good credit history of your co-signer to be considered for approval and secure better interest rates and terms.

Not every lender allows co-signers. Make sure you apply for a loan with lenders that allow co-signers, such as Citizens Bank and Earnest.

7. What type of personal loan is best for me?

The most common type of personal loan is an unsecured loan. An unsecured loan is borrowed in a lump sum, without collateral, and paid off in installments over a period of several months or years.

But here are some other personal loan options you should consider:

  • Secured personal loans are backed by collateral you provide, such as a savings account or auto equity.
  • Fixed-rate loans charge the same interest rate throughout the life of the loan.
  • Variable-rate loans often have lower starting rates but give the lender the option to bump them up later.
  • Peer-to-peer personal loans, such as those offered through LendingClub, are funded by individual investors and sometimes have flexible eligibility requirements or lower interest rates.

Each type of personal loan has benefits and drawbacks. And not every lender offers every kind of loan. Consider all available options before choosing one that’s the best fit for your finances.

8. What personal loan rates do I qualify for?

When you shop for a personal loan, comparing interest rates will help you find the lowest-cost option.

If you have a high credit score and other good qualifications (such as a high income and low debt level) you’re likely to get the best personal loan rates. For instance, SoFi offers personal loan rates starting at 6.26%.

Even if you have less than perfect credit, it pays to shop around for personal loan rates. You can get preapprovals (often called rate estimates) from a few lenders and compare them.

9. Will I pay origination or other personal loan fees?

Alongside interest rates, you also should compare fees to identify the best deal.

Take origination fees, for example. An origination fee is usually 1 to 6  percent of the loan’s balance. It’s possible a loan with a low rate might not be the best deal if it also carries a high origination fee.

Plus, a lender will take out the amount of the origination fee from the loan balance before disbursing funds. So make sure you’re accounting for this fee and requesting a high enough balance to cover the additional cost.

10. Is this lender trustworthy?

Make sure you choose a lender that will deliver a good experience. Check reviews of the lender from real customers. These reviews will alert you to potential red flags and unexpected costs and give you a glimpse into how responsive the lender’s customer support team is.

Additionally, many reviewers include their credit info and whether they got approved, giving you a good idea of what kind of borrowers these lenders work with.

Throughout the process of shopping for a personal loan, watch out for the following warning signs of predatory lenders:

  • No-credit-check loans
  • Unclear fees and hidden costs
  • High-pressure sign-up processes

It’s easy to get so caught up in how to get a personal loan that you lose sight of what it will be like to repay it. That’s why it’s important to take your time to research and compare your options and choose a personal loan you feel confident about. It’s worth it to find the best deal on a personal loan  you could be dealing with it for years to come.

Interested in a personal loan?

Here are the top personal loan lenders of 2018!
LenderAPR RangeLoan Amount 
1 Includes AutoPay discount. Important Disclosures for SoFi.

SoFi Disclosures

  1. Personal Loans: Fixed rates from 6.990% APR to 14.865% APR (with AutoPay). Variable rates from 6.255% APR to 12.555% APR (with AutoPay). SoFi rate ranges are current as of September 1, 2018 and are subject to change without notice. Not all rates and amounts available in all states. See Personal Loan eligibility details. Not all applicants qualify for the lowest rate. If approved for a loan, to qualify for the lowest rate, you must have a responsible financial history and meet other conditions. Your actual rate will be within the range of rates listed above and will depend on a variety of factors, including evaluation of your credit worthiness, years of professional experience, income and other factors. See APR examples and terms. Interest rates on variable rate loans are capped at 14.95%. Lowest variable rate of 6.255% APR assumes current index rate derived from the 1-month LIBOR of 2.08% plus 4.425% margin minus 0.25% AutoPay discount. For the SoFi variable rate loan, the 1-month LIBOR index will adjust monthly and the loan payment will be re-amortized and may change monthly. APRs for variable rate loans may increase after origination if the LIBOR index increases. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account.

    To check the rates and terms you qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull.See Consumer Licenses.
  2. Minimum Credit Score: Not all applicants who meet SoFi’s minimum credit score requirements are approved for a personal loan. In addition to meeting SoFi’s minimum eligibility criteria, applicants must also meet other credit and underwriting requirements to qualify.
  3. SoFi Personal Loans are not available to residents of MS. Maximum interest rate on loans for residents of AK and WY is 9.99% APR, for residents of IL with loans over $40,000 is 8.99% APR, for residents of TX is 9.99% APR on terms greater than 5 years, for residents of CO, CT, HI, VA, SC is 11.99% APR, and for residents of ME is 12.24% APR. Personal loans not available to residents of MI who already have a student loan with SoFi. Personal Loans minimum loan amount is $5,000. Residents of AZ, MA, and NH have a minimum loan amount of $10,001. Residents of KY have a minimum loan amount of $15,001. Residents of PA have a minimum loan amount of $25,001. Variable rates not available to residents of AK, TX, VA, WY, or for residents of IL for loans greater than $40,000.
  4. Terms and Conditions Apply: SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet SoFi’s underwriting requirements. Not all borrowers receive the lowest rate. To qualify for the lowest rate, you must have a responsible financial history and meet other conditions. If approved, your actual rate will be within the range of rates listed above and will depend on a variety of factors, including term of loan, a responsible financial history, years of experience, income and other factors. Rates and Terms are subject to change at anytime without notice and are subject to state restrictions. SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. Licensed by the Department of Business Oversight under the California Financing Law License No. 6054612. SoFi loans are originated by SoFi Lending Corp., NMLS # 1121636. (www.nmlsconsumeraccess.org)

2 Includes AutoPay discount. Important Disclosures for Payoff.

Payoff Disclosures

  1. All loans are subject to credit review and approval. Your actual rate depends upon credit score, loan amount, loan term, credit usage and history. Currently loans are not offered in: MA, MS, NE, NV, OH, and WV.

3 Important Disclosures for FreedomPlus.

FreedomPlus Disclosures

  1. All loans available through FreedomPlus.com are made by Cross River Bank, a New Jersey State Chartered Commercial Bank, Member FDIC, Equal Housing Lender. All loan and rate terms are subject to eligibility restrictions, application review, credit score, loan amount, loan term, lender approval, and credit usage and history. Eligibility for a loan is not guaranteed. Loans are not available to residents of all states – please call a FreedomPlus representative for further details. The following limitations, in addition to others, shall apply: FreedomPlus does not arrange loans in: (i) Arizona under $10,500; (ii) Massachusetts under $6,500, (iii) Ohio under $5,500, and (iv) Georgia under $3,500. Repayment periods range from 24 to 60 months. The range of APRs on loans made available through FreedomPlus is 4.99% to a maximum of 29.99%. APR. The APR calculation includes all applicable fees, including the loan origination fee. For Example, a four year $20,000 loan with an interest rate of 15.49% and corresponding APR of 18.34% would have an estimated monthly payment of $561.60 and a total cost payable of $7,948.13. To qualify for a 4.99% APR loan, a borrower will need excellent credit on a loan of $15,000 with a term of 24 months, and qualify for at least two of the following discounts: (1) add a co-borrower who has sufficient income; (2) use at least fifty percent of the loan proceeds to directly pay off existing debt; or (3) show proof of having at least forty-thousand dollars in retirement savings – contact FreedomPlus for further details.

4 Important Disclosures for Citizens Bank.

Citizens Bank Disclosures

  1. Personal Loan Rate DisclosureFixed interest rates from 6.49% – 19.49% (6.49% – 19.49% APR) based on applicable terms. Lowest rates range from 5.99%-18.99% (5.99%-18.99% APR), are for eligible applicants, require a 3-year repayment term, and include our Loyalty and Automatic Payment Discounts of 0.25 percentage points each, as outlined in the Loyalty Discount and Automatic Payment Discount disclosures. Subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change.
  2. Loyalty Discount: The borrower will be eligible for a 0.25 percentage point interest rate reduction on their loan if the borrower has a qualifying account in existence with us at the time the borrower has submitted a completed application authorizing us to review their credit request for the loan. The following are qualifying accounts: any checking account, savings account, money market account, certificate of deposit, automobile loan, home equity loan, home equity line of credit, mortgage, credit card account, student loans or other personal loans owned by Citizens Bank, N.A. Please note, our checking and savings account options are only available in the following states: CT, DE, MA, MI, NH, NJ, NY, OH, PA, RI and VT. This discount will be reflected in the interest rate and Annual Percentage Rate (APR) disclosed in the Truth-In-Lending Disclosure that will be provided to the borrower once the loan is approved. Limit of one Loyalty Discount per loan, and discount will not be applied to prior loans. The Loyalty Discount will remain in effect for the life of the loan.
  3. Automatic Payment Discount: Borrowers will be eligible to receive a 0.25 percentage point interest rate reduction on their Citizens Bank Personal Loan during such time as payments are required to be made and our loan servicer is authorized to automatically deduct payments each month from any bank account the borrower designates. If our loan servicer is unable to successfully withdraw the automatic deductions from the designated account two or more times within any 12-month period, the borrower will no longer be eligible for this discount.

5 Important Disclosures for LendingPoint.

LendingPoint Disclosures

  • Loan approval is not guaranteed. Actual loan offers and loan amounts, terms and annual percentage rates (“APR”) may vary based upon LendingPoint’s proprietary scoring and underwriting system’s review of your credit, financial condition, other factors, and supporting documents or information you provide. Origination or other fees from 0% to 6% may apply depending upon your state of residence. Upon LendingPoint’s final underwriting approval to fund a loan, said funds are often sent via ACH the next non-holiday business day. LendingPoint makes loan offers from $2,000 to $25,000, at rates ranging from a low of 15.49% APR to a high of 34.49% APR, with terms from 24 to 48 months. The loan offer(s) shown reflect a 28 day payment cycle which is being offered as a courtesy as many of our customers are paid on a biweekly schedule and thus this may better align the loan payment dates with your actual income receipt schedule.

6 Important Disclosures for LendingClub.

LendingClub Disclosures

All loans made by WebBank, Member FDIC. Your actual rate depends upon credit score, loan amount, loan term, and credit usage & history. The APR ranges from 6.16% to 35.89%. For example, you could receive a loan of $6,000 with an interest rate of 7.99% and a 5.00% origination fee of $300 for an APR of 11.51%. In this example, you will receive $5,700 and will make 36 monthly payments of $187.99. The total amount repayable will be $6,767.64. Your APR will be determined based on your credit at time of application. The origination fee ranges from 1% to 6% and the average origination fee is 5.49% as of Q1 2017. There is no down payment and there is never a prepayment penalty. Closing of your loan is contingent upon your agreement of all the required agreements and disclosures on the www.lendingclub.com website. All loans via LendingClub have a minimum repayment term of 36 months or longer.


7 Important Disclosures for Earnest.

Earnest Disclosures

  1. Earnest does not lend in Alabama, Delaware, Kentucky, Nevada, or Rhode Island.

8 Important Disclosures for Avant.

Avant Disclosures

* The actual rate and loan amount that a customer qualifies for may vary based on credit determination and other factors. Funds are generally deposited via ACH for delivery next business day if approved by 4:30pm CT Monday-Friday. Avant branded credit products are issued by WebBank, member FDIC.

** Example: A $5,700 loan with an administration fee of 4.75% and an amount financed of $5,429.25, repayable in 36 monthly installments, would have an APR of 29.95% and monthly payments of $230.33


* Important Disclosures for Upgrade Bank.

Upgrade Bank Disclosures

* Your loan terms are not guaranteed and are subject to our verification and review process. You may be asked to provide additional documents to enable us to verify your income and your identity. This rate includes an Autopay APR reduction of 0.5%. By enrolling in Autopay your payments will be automatically deducted from you bank account. Selecting Autopay is optional. Annual Percentage Rate is inclusive of a loan origination fee, which is deducted from the loan proceeds. Late payments or subsequent charges and fees may increase the cost of your fixed rate loan. All loans made by WebBank, member FDIC. Please refer to Upgrade’s Terms of Use and Borrower Agreement for all terms, conditions and requirements.

** Accept your loan offer and your funds will be sent to your bank via ACH within one (1) business day of clearing necessary verifications. Availability of the funds is dependent on how quickly your bank processes this transaction. From the time of approval, funds should be available within four (4) business days.

7.73% – 29.99%$1,000 - $50,000Visit Upstart
6.26% – 14.87%1$5,000 - $100,000Visit SoFi
6.99% – 35.97%*$1,000 - $50,000Visit Upgrade
5.99% – 24.99%2$5,000 - $35,000Visit Payoff
4.99% – 29.99%3$10,000 - $35,000Visit FreedomPlus
5.99% – 18.99%4$5,000 - $50,000Visit Citizens
15.49% – 34.49%5$2,000 - $25,000Visit LendingPoint
6.16% – 35.89%6$1,000 - $40,000Visit LendingClub
6.99% – 18.24%7$5,000 - $75,000Visit Earnest
9.95% – 35.99%8$2,000 - $35,000Visit Avant
Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality and will make a positive impact in your life. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print understand what you are buying, and consult a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time. Please do your homework and let us know if you have any questions or concerns.