If you need a personal loan, you might be tempted to go with the first loan you can find. You might need money quickly and feel like you don’t have time to shop. While understandable, verifying multiple banks has several benefits that you won’t want to miss.
Lower fees and interest rates are some of the things you might be able to find while shopping around, but they aren’t the only benefits. I spoke with the experts who highlighted the greatest benefits you will gain from shopping.
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Lower interest rates will always be one of the most important things to look for in a loan. Although certain factors influence the rates you are offered, particularly your credit score, you can always find a better rate by shopping around. Additionally, some banks will let you “window shop” without impacting your credit history.
“Exploring loan rates from multiple banks allows you to compare rates and fees, which can help you get the best deal possible,” said Brett Sohns, co-founder of LifeGoal Investments. “Many lenders will allow you to apply for prequalification by submitting a few basic details so you can review potential rates and terms, often without an in-depth question on your credit report.”
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After interest rates, what everyone thinks about with personal loans are fees. Generally, interest is what you’ll pay the most, but some banks add a lot of fees that can really add up. “Some banks may have service charges, account fees, or prepayment fees that others may waive entirely, saving you money,” said Jason Priebe, CFP® of Wealth Priebe.
If you’re in a rush, you might not notice these fees until they start to impact your wallet. But when you shop around, you can get a full list of each lender’s fees and how they’ll affect you.
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Terms and conditions are another aspect of personal loans that is easy to overlook in the initial stage, but can end up having a big impact in the long run. Therefore, it is important to pay attention to the conditions when shopping.
Priebe said the questions to ask here are how the bank handles late payments and what happens when you want to refinance. After all, late payments do happen, whether due to an event like COVID-19 or other extenuating circumstances. And if you want to refinance later, it’s important to work with a lender who will be flexible.
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Technology has become an increasingly important part of our lives. These days we want convenience, like being able to make payments through a smartphone app. But not all banks have the latest and greatest technology, which could cause headaches later.
“A large bank may have more technical capabilities than some small banks when it comes to online banking, paperless or automatic payment,” Priebe said. “You don’t want to find yourself having to call your bank every month and wait 45 minutes just to make a payment.”
Of course, this is an excellent point. Before today’s modern conveniences, people could physically go to the bank to make a payment. Today, we expect to be able to pay online, whether using a laptop, smartphone or setting up automatic payment. While you don’t have to wait to make a payment over the phone, it’s not the most convenient way to pay.
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Accessibility, in this case, refers to the ability to get the help you need when you need it. This ties into the previous point about long wait times, but what if you need help with something other than a payment?
“Is it easy to reach someone to ask questions? Can you go to the branch if there is a problem? Priebe said. “Do you feel comfortable with the bank so you can ask about your loan without feeling stupid?”
Loans can have a big impact on your finances and your life, so it’s important that help is there when you need it. Otherwise, you’ll wish you had gone with someone else. “When you’re making some of the most important purchases of your life (i.e. homes, businesses, etc.), those things can really make or break your experience,” Priebe said.
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