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You’ve researched a few different financing options and settled on a personal loan, but your work isn’t done yet. The next step is to decide which lender can make you the best offer.
Affordability should be a top priority: If one lender offers a standout annual percentage rate, that’s probably the best option. But when you have two or more competitive offers, weigh special features such as discounts, funding time and payment flexibility to break the tie.
Here are five features to look for when comparing personal loans.
Application and prepayment fees are rare with personal loans, but you could encounter an origination fee. This charge — usually 1% to 10% of your loan amount — is often subtracted from the loan before you get it, but a lender may include it in the monthly payments, says Jovan Johnson, an Atlanta-area certified financial planner. You don’t get anything for the fee; it’s just money the lender charges to process the loan.
An origination fee doesn’t automatically make a loan the most expensive, Johnson says. Compare annual percentage rates, which include the interest rate and other fees, to see which loan costs the least.
Some online lenders that work with good- or excellent-credit borrowers (690 or higher FICO) charge zero fees, including late and nonsufficient funds fees.
Rate discounts are usually small perks that can add up. Many lenders offer to reduce your rate by a small amount — often 0.25 to 0.5 percentage points — if you set up automatic payments.
Other lenders may reduce your rate by a percentage point or two on a debt consolidation loan if you let them directly pay off your debts, instead of giving the money to you.
Banks often provide discounts for their existing customers, especially those with a large amount of money in a savings or investment account, says Tyler Smith, a CFP with BBK Wealth Management in the Indianapolis area.
Pre-qualification lets you check your rate without hurting your credit score, but it’s more common at online lenders than banks. You could use the rate you were quoted by an online lender to negotiate a lower rate at your bank, Smith says.
"Especially if you’re in a position where you have good credit and good payment history, they will do anything that they can to get you to borrow money," he says.
Personal loans can help you cover urgent expenses, like a roof repair, because they’re typically funded in under a week — and sometimes even faster.
Online lender LightStream says applications submitted before 2:30 p.m. ET on a weekday with all the necessary documentation may be approved and funded the same day. Other lenders can approve and fund a loan within another day or two, says Alvin Carlos, a Washington, D.C.-based CFP with District Capital Management.
"If, let’s say, you need to pay a medical bill that’s due tomorrow, some lenders will give you the money as soon as the next day," Carlos says.
A tip to keep things moving: Gather documents like W-2s, pay stubs and proof of address before you start an application.
Your loan’s repayment term factors into the size of your monthly payment. A longer term results in lower monthly payments but more interest paid overall, Johnson says.
Choose a timeline that gives you affordable monthly payments while still keeping interest costs low, he says. Some lenders let you repay a loan in three or five years, while others offer terms between two and seven years.
Johnson recommends taking flexibility further by asking a lender what happens if you lose your job or run into an emergency and need to skip a payment or two.
"With any loan that you apply for, you always need to know the 'what-ifs,'" Johnson says. "Will they work with you? Will they extend the loan with no additional fee or upcharge?"
Marcus by Goldman Sachs lets borrowers defer a payment after 12 consecutive on-time payments. Online lender SoFi offers unemployment protection that puts a loan in forbearance.
Customer experience isn’t as easy to quantify as origination fees and rate discounts, but gauging how things will go once you have the loan could save you from future headaches.
Offering autopay isn’t enough to make repayment seamless anymore, Smith says. If you use a budgeting app or manage finances another way, choosing a lender that links your loan could save years-long hassles.
"With the amount of technology out there, having that convenience to hook it up is very important," he says.
Subjective reviews from friends and previous customers, as well as objective online reviews, can surface issues you may not see before you borrow.
You can find out what other borrowers think about the lender by reading complaints at the Consumer Financial Protection Bureau or Better Business Bureau websites.
It's even better if you have a friend or family member who's used a lender before, Johnson says.
Disclosure: A previous version of this article misstated the details for a rate discount. This article has been corrected.