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If you need a personal loan, you may be tempted to get the first one you can find. You may need money quickly and feel like you simply don’t have time to shop. While this is understandable, there are many benefits to checking out from many banks that you won’t want to miss.
Fees and low interest rates are among the things you may be able to find by shopping, but they aren’t the only advantages. I spoke with experts who have highlighted the biggest advantages you will gain by shopping.
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Low interest rates will always be one of the most important things to look for in a loan. While some factors will affect the rates offered to you – especially your credit score – you can still find a better price by shopping. In addition, some banks allow you to “shop” without any impact on your credit history.
“Exploring loan rates from multiple banks allows you to compare rates and fees, which can ultimately help you get the best possible deal,” said Brett Sohns, co-founder at LifeGoal Investments. “Many lenders will allow you to apply for pre-qualification by submitting a few basic details so you can see potential rates and terms, often without hard inquiry about your credit report.”
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After interest rates, the thing everyone thinks about with personal loans is fees. Generally, interest is where you’ll pay more, but some banks charge a lot of fees which can really add up. “Some banks may charge service fees, account fees or early settlement fees that others may waive entirely, saving you money,” said Jason Priebe, CFP® at Priebe Wealth.
If you’re in trouble, you may not notice these fees until they start affecting your wallet. But when you shop, you can get a complete list of each lender’s fees and how they will affect you.
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Terms and conditions are another aspect of personal loans that are easy to ignore at the initial stage, but can end up having a huge impact in the long run. Thus, it is important to pay attention to the terms when shopping.
Pribe 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 happen, whether it’s due to an event like COVID-19 or some other extenuating circumstance. And if you want to refinance in the future, it is 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, such as being able to make payments via a smartphone app. But not all banks have the latest and greatest technology, and that can cause problems down the road.
“A larger bank may have more technical capabilities than some of the smaller banks when it comes to online banking, handling paper transactions or automatic payments,” Pribe said. “You don’t want to find yourself having to call your bank every month and just wait 45 minutes to make a payment.”
Of course, this is a great point. Before today’s modern conveniences, people probably actually went to the bank to make a payment. Today, we expect to be able to pay online, whether that’s using a laptop, a smartphone, or by setting up an automatic payment. Even if you don’t have to wait before making a phone payment, this is 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 waiting times, but what if you need help with something other than making a payment?
“How easy is it to convince someone to ask questions? Can you go to the branch if there is a problem?” Pribe said. “Do you feel comfortable with the bank that you can ask any questions about your loan without feeling foolish?”
Loans can have a huge impact on your finances and your life, so it’s important that help is there when you need it. If not, you will wish you could go with someone else. “When you make some of the biggest purchases of your life (like homes, businesses, etc.), these things can really make or break your experience,” Priebe said.
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