Compare Reviews for Personal Loans

Lenders make money on loans by charging customers interest and fees. Interest is calculated as a percent of the amount borrowed. There are many ways to calculate interest payments. Companies vary based on the amount of interest and fees they charge.

• High interest loans: Some personal loan companies charge high-interest rates, which encourage customers to repay loans quickly. Certain ‘pay day’ loans offer money with very high interest rates to tide you over until your next paycheck.
• Low interest loans: Many personal loan companies offer customers low-interest rate loans, which are often used to refinance debt with higher-interest rates. For example, if you have 3 credit cards which charge an average of 20% interest, you may want to pay off the balance due on those cards with a personal loan that has a lower interest rate of 12%. In general, to qualify for a lower interest rate, the borrower needs a credit score above a specific level.
• Varied interest rates: Many personal loan companies charge a wide variety of interest rates, which differ based on who is borrowing the money and how long it will take them to repay the loan. In general, borrowers with higher credit scores are charged lower interest rates. Additionally, smaller loans usually have higher interest charges.

Personal loan companies differ from one another by the types of loans that they offer.

• Secured loan: This type of loan requires an asset to secure the loan. If the borrower defaults on the loan, the lender has a right to take the collateral. Secured loans are commonly used when buying a vehicle.
• Unsecured loan: There is no collateral required on an unsecured loan, thus the interest rates are normally higher than for an unsecured loan due to the higher risk to the lender.
• Single payment loans: Single payment loans allow borrowers to borrow an amount of money, then agree to repay that amount in full at some point within a fixed amount of time.
• Monthly payment loans: These types of loans require the borrower to repay the loan principal and interest with a fixed amount each month. The repayment dates are scheduled at the start of the loan.
• Salary advance loans: People who borrow cash for a short time period, usually between paychecks, may use personal loan companies that offer salary advance loans; these are often short-term, low amount loans with high interest rates and fees.

Another way that personal loan companies differ is in their borrower application process. The application process gives the lender basic information about the client’s current expenses and income as well as their credit history. This allows the lender to find out whether the borrower is likely to repay the loan in a timely manner. Before applying for a personal loan it’s useful for a borrower to check his or her credit score. Also, gather all of the necessary paperwork in advance and to make certain to complete the application in full.

• Online application: Some personal loan companies allow customers to apply for loans by entering all the necessary information online, which the loan company then assesses to determine the borrower’s creditworthiness.
• Phone application: Loan companies that have a phone-based application require borrowers to apply for a loan over the phone. Before making the call, prospective borrowers should compile all of their related documents.
• Mixed process: Many personal loan companies require customers to fill out application forms with their personal information, and then follow up with phone calls to verify information and discuss loan options and terms.

Personal loan companies differ from one another based on the amounts of the loans that they offer. In general, the loan amounts vary from company to company. Personal loans may be for an amount as low as a few hundred dollars on up to $70,000 for a small business or home remodel loan.

• Maximum limits: Some personal loan companies put a cap on the maximum amount a customer can borrow.
• Minimum limits: Some personal loan companies require borrowers to take out at least a certain amount in order to borrow.

Personal loan companies vary based on the types of fees they charge with their loans.

• Fee-free: Fee-free personal loan companies do not charge any fees for their loans and simply make money from the loan's interest payments.
• Loan fees: Other personal loan companies charge standard fees such as an origination fee and a closing fee. These may be a set fee or calculated as a percent of the amount borrowed.
• Late and failure-to-pay fees: Most personal loan companies charge customers fees for late or missed payments.

There are a variety of ways a personal loan is funded.

• Bank funded: Historically, banks and credit unions use depositors’ money to fund borrowers’ loans. Banks and related financial institutions also fund payday lenders and other types of personal loan providers.
• Peer funded (individual): Individual peer support is a new type of funding alternative for both borrowers and lenders. Peer funded loans are provided by regular individuals or peers and not financial institutions.
• Peer funded (group): Similar to individually funded peer loans, many hedge funds, bank endowment funds and other large investors fund personal loans through the peer-to-peer or social lending platforms. The difference between individual and group peer funded loans is typically the amount of money lent-groups typically lend greater amounts than individuals.