How to know if a personal loan is good or bad. We will walk you through 10 things to look at.

A personal loan can be a powerful financial tool. It can help you out of an emergency, allow you to make a major purchase, or even help you get out of debt by consolidating higher cost loans. But lending is an interesting product. It doesn't matter if you take a loan from company A or company B, you're still just getting money. Money is money. But those loans can be vastly different. One could be great for your particular situation, while the other one could cause you additional trouble. When you get a personal loan offer, how can you tell if it's good or bad? In this video, we're gonna walk you through what you should look at before you accept a loan offer. If you go through these things, you'll be able to determine which loan would be best for you. We know what we're talking about. We spent years in the lending industry. We understand how lenders think, what their processes are, and how you can ensure you're finding the loan that fits into your lifestyle. We currently track hundreds of credit companies in the United States, so we have a great view of what's out there and what you can expect. We're gonna give you the inside scoop on how to evaluate whether a personal loan is good or bad. Make sure you know what your total monthly obligation will be and that you can afford it in your budget. Pay particular attention to the frequency of the payments. Some lenders have monthly payments, others have biweekly payments, and others have payments twice a month. Knowing exactly how much will be expected of you is the first biggest question. The loan's interest rate will be represented as an APR, or annual percentage rate. By law, a lender must calculate the APR a certain way, and they must present it to you in a certain way. This is so you can compare loans with each other, but you will wanna make sure you're looking at whether the interest rate is fixed or variable. Personal loans tend to have fixed interest rates and revolving credit like credit cards and lines of credit tend to have variable rates. Compare the APR with other offers that you've been approved for. But just because the APR is lower, it doesn't automatically mean that the loan is cheaper. That's why you need to look at the total interest expense. All legitimate lenders will not only tell you what the APR of the loan is, they will tell you the total amount of interest you will pay over the course of the loan. That total amount is really important. You can end up paying more in overall interest even if the loan you selected has a lower APR. That can happen if you select a loan with a longer term. When you are comparing two loans, if one loan has a lower APR, but a higher total interest amount, that means that the loan has a longer loan term. The loan term or the repayment period will have implications on how long you are in debt, as well as how much interest you end up paying. A longer repayment term will mean a lower monthly payment, but a higher total interest paid. You should always take the lowest term length that you can comfortably afford. An origination fee on a personal loan is usually a percentage of the total loan amount. It is taken out of the proceeds of the loan. The origination fee is accounted for in the APR. So a low APR with an origination fee just means that the interest rate is lower, but you won't get a reimbursement on your origination fee if you pay the loan off early. So it's nice to have a low origination fee to incentivize paying the loan off early. Most lenders charge a late fee, but the cost can range from $10 up to $39. And some lenders have grace periods. Some lenders also have non-sufficient funds fees that they will charge you if they attempt to take the payment and it fails because you don't have enough money in your account. If you are looking at a line of credit, you will also want to see if there are any account maintenance fees. Did the lender add unnecessary insurance costs to the loan, like unemployment insurance or coverage for collateral? Make sure that you understand all of the ways that the loan could cost you more than you expect. See if the lender offers options for changing your payment date or skipping a payment during financial hardship. A lender that has policies in place for flexibility can make repaying the loan much easier and keep a new financial emergency from creating a domino effect on the rest of your finances. If you are someone with a variable income that can change month to month, payment flexibility could be very important to you. If you have a financial emergency that coincides with a low income month, you could struggle to make the payment. If your loan is secured, try to understand what kind of claim that the company can make on your collateral. Will they repossess the collateral, foreclose, put a lien on the property? Make sure you understand the implications of the loan. In general, I think most personal loans should be unsecured. Securing a loan can put your collateral at risk if you run into additional trouble. However, it's important to recognize that putting up collateral can make it easier to get approved, get approved for more money or score a lower interest rate. So going with a secured loan could be the factor that determines whether you get the loan that you need. Some lenders will offer APR discounts, but only if you trigger the requirements before you accept the loan. The most common discount like this is a discount for signing up for auto pay. If you sign up for auto pay after you accept the loan, you don't get the discount. Make sure that you understand all of the available discounts before you accept the loan. Most personal loans put no restrictions on how you can use the funds. However, some lenders do. Common restrictions include business use or higher education tuition. You will want to make sure you understand all of the restrictions on the loan, especially if you already have a specific purpose for the money. If you review the loan terms for these items, you can be fairly well assured that you understand the loan. This is the first step to understanding whether a loan would be good or bad for you. But lending is actually quite personal. What you can qualify for will depend on your particular credit profile. Lenders will look at your credit history, payment history, debt to income ratio, income, type of income, and other factors. So whether a loan is good for you will depend on whether it fits into your lifestyle and whether it's the best deal that you can get. That's why it's so important that you shop around. If you can, you want to have two or three offers in hand before you accept a loan. That will allow you to compare the different offers so you can see which one would be best for you. The idea of shopping around that much can feel daunting. Who has the time for that? At the UConn project, we tried to make shopping around easy. If you visit our marketplace page, you can filter for the purpose of your loan, the amount that you are looking for, and your credit score. When you apply to one of our featured lenders, we'll check your rate with up to 40 other lenders behind the scenes. Our partners use a soft credit check, so applying won't hurt your credit score. We will show you all of your approved offers so you can pick the loan that would be best for you in your circumstances. Taking a few extra minutes evaluating your loan offers before you accept one can be a great way of making sure that the loan is the best one that you can get in your situation. It can also give you a clear idea of what you need to do to pay the loan off successfully, and maybe even early. Are there things about personal loans you evaluate that we missed? Leave a comment below and tell us what you think. We're trying to build a community of people who can share their experiences so we can all be better informed when making decisions about our personal finances. If you found this information helpful, please like this video and subscribe to our channel. Your support helps us out, and we really appreciate it. Thanks for watching.