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Loan Calculators
Comparing Personal Loans
Before you sign on the dotted line and set yourself up for years of monthly payments, you should go about the business of comparing personal loans so that you get the best deal possible. Forget about the fact that people with good credit get good deals and people with bad credit get not-so-good deals on loans. While that might be true and it might be nice to be one of those individuals with good credit, it's essential that you take time comparing the personal loan options that you have. This strategy could save you lots of money.
What to Look at When Comparing Personal Loans: Type of Loan
Although at first look, comparing the interest rates on personal loans might seem to be the only step you need to take, that isn't necessarily true. In fact, one key factor to remember when comparing loans is that the loan type needs to remain consistent across your comparisons. Lots of different types of loans exist including fixed rate, variable rate, balloon loans, interest only loans, payday loans, and even more.
Since each type of loan has its own unique twists and turns, it's important to keep your comparison limited to loans of the same type. After all, what good would it do to compare a variable rate loan to an interest only loan? One has extremely small payments that suddenly jump up after about ten years and the other one has an interest rate that changes every so many years. Therefore, you should compare the interest rate on loans of the same type.
Additionally, different types of loans include additional fees. These fees are reflected in the annual percentage rate, also referred to as the APR. Comparing the APR is the most accurate way to compare the true costs of a loan with that of another. The APR also takes into account such fees as points, document fees, loan origination fees, closing costs, as well as any other fees that are included in the cost of the loan.
For borrowers who want to see the list of their loan costs, the good faith estimate is the best way to do so. Lenders are required to provide this to you so that you can have a good idea as to the full closing costs of taking out a loan. The good faith estimate includes information on all of the fees including appraisal fees, title search fees, document preparation fees, etc. All of these fees are calculated into the APR as mentioned above, allowing borrowers to get an accurate picture as to which loan is going to be more affordable for them.
