5 characteristics to look for in a personal loan

You’ve researched different financing options and decided on a personal loan, but your job is not yet done. The next step is to decide which lender can give you the best deal.

Affordability should be a top priority: if a lender offers an exceptional annual percentage rate, this is probably the best option. But when you have two or more competitive offers, consider special features like discounts, financing time, and payment flexibility to break the tie.

Here are five characteristics to look for when comparing personal loans.

No charges

Application and prepayment fees are rare with personal loans, but you might encounter set-up fees. These fees – typically 1% to 10% of your loan amount – are often subtracted from the loan before you get it, but a lender can include them in monthly payments, says Jovan Johnson, a certified financial planner with the Atlanta area. You don’t get anything for the fees; it is just the money that the lender asks to process the loan.

A set-up fee doesn’t automatically make a loan the most expensive, Johnson says. Compare annual rates as a percentage, which include the interest rate and other fees, to see which loan is less expensive.

Some online lenders who work with borrowers with good or excellent credit (690 FICO or higher) do not charge any fees, including late fees and insufficient funds.

Tariff discounts

Tariff 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 can reduce your rate by one or two percentage points on a debt consolidation loan if you let them pay off your debts directly, instead of giving you the money.

Banks often offer discounts to their existing customers, especially those who have a large sum of money in a savings or investment account, says Tyler Smith, CFP at BBK Wealth Management in the Indianapolis area.

Prequalification allows you to check your rate without hurting your credit score, but this is more common with online lenders than at banks. You can use the rate offered to you by an online lender to negotiate a lower rate with your bank, Smith explains.

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“Especially if you are in a position where you have good credit and a good payment history, they will do whatever they can to get you to borrow money,” he says.

Quick financing

Personal loans can help you cover urgent expenses, like a roof repair, because they are usually funded in less than a week – and sometimes even faster.

Online lender LightStream says applications submitted by 2:30 p.m. ET on a weekday with all necessary documentation can be approved and funded the same day. Other lenders can approve and fund a loan in a day or two, says Alvin Carlos, Washington, DC-based CFP with District Capital Management.

“If, say, you have to pay a medical bill that has to be paid tomorrow, some lenders will give you the money the very next day,” says Carlos.

A tip to get things done: Gather documents like W-2s, pay stubs and proof of address before starting a claim.

Payment flexibility

The repayment period of your loan is taken into account in the amount of your monthly payment. A longer term translates to lower monthly payments but more interest paid overall, Johnson says.

Choose a schedule that gives you affordable monthly payments while keeping interest charges low, he says. Some lenders allow you to pay off a loan in three or five years, while others offer terms of between two and seven years.

Johnson recommends pushing the flexibility further by asking a lender what happens if you lose your job or have an emergency and need to skip a payment or two.

“With any loan you apply for, you should always know the ‘what ifs,’ says Johnson.” Will they work with you? Will they extend the loan at no extra cost or extra cost? “

Marcus by Goldman Sachs allows borrowers to defer a payment after 12 consecutive payments on time. SoFi online lender offers unemployment protection that puts a loan on hold.

Client experience

The customer experience isn’t as easy to quantify as the origination fees and rate discounts, but assessing how things will go after you get the loan could save you future headaches.

Offering automatic payment is no longer enough to make reimbursement transparent, Smith says. If you are using a budgeting app or manage finances in another way, choosing a lender who ties your loan could save you years of hassle.

“With the amount of technology available, it’s very important to have this convenience to plug it in,” he says.

Subjective reviews from friends and former customers, as well as objective reviews online, can bring up issues that you might not see until you borrow.

You can find out what other borrowers think about the lender by reading the complaints on the Consumer Financial Protection Bureau or the Better Business Bureau websites.

It’s even better if you have a friend or family member who has used a lender before, Johnson says.

Disclosure: A previous version of this article incorrectly stated the details of a rate discount. This article has been corrected.

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Annie Millerbernd writes for NerdWallet. Email: amillerbernd@nerdwallet.com.

Article 5 Features To Look For In A Personal Loan originally appeared on NerdWallet.