How to choose a lender for a personal loan

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Ask a Lender
December 16, 2016 | Updated September 25, 2017

Key Points

Checklist for your lender search

  • Shop around
  • Loan amount
  • Fees and charges
  • Loan terms and conditions
  • Legitimacy 

You need a personal loan, but you’ve never taken one out before. You don’t even know where to start.

One of the first things you should consider is which lender will lend you money. Each lender is a little different, and although some loan products might be a great fit for one person, they might be totally wrong for someone else. Doing some research and comparing potential lenders can help you get the best interest rate and the most favorable loan terms.

Shop around

You don’t have to do business with the first lender you come across, and one of the best ways to find the right one for you is to shop around. Contact multiple lenders and ask plenty of questions, using the criteria you’ll read about later in this article. Compare the interest rates, loan terms, and other loan information until you find a loan that matches whatever criteria you’re looking for.

There are pros and cons to using different kinds of lenders. State-regulated lenders, for example, are lenders that are not affiliated with a bank. Peer-to-peer lenders match borrowers with individual lenders and often offer favorable interest rates to people with higher-than-average credit scores. Other lender types include lenders affiliated with Native American tribes and offshore lenders that operate out of other countries.

Although you should shop around for different loans, you should be cautious about applying for too many loans, as “hard inquiries” from lenders can drop your credit score by a few points. Lots of inquiries can add up to a significant impact to your score.

By asking questions of potential lenders, you can narrow your options down to a small pool of candidates, thereby reducing the number of actual applications and subsequent credit inquiries.

Lender checklist

How can you compare lenders? Here is a list of criteria that can help you find a personal loan lender that works for you.

 Loan amount

Different lenders may approve you for different amounts of money. Just because a lender offers you more money, however, doesn’t mean you should take more. It costs more to borrow money than it does to spend money you’ve already saved up. If you can finance part of a purchase yourself and borrow the rest, it may be your best option.

 Fees and charges

Each lender has its own fee and charge structure. Find out what prospective lenders are charging, compare the fees, and apply with the lender that has the lowest fees.

 Loan terms and conditions

Some lenders may offer different terms or conditions on the loans they offer. Is there a fixed or variable interest rate? Is there a fixed term? Find out as much information as you can about every detail of the loan you plan to take out.


Unfortunately, not every lender is legitimate. Investigate whether a broker might be fraudulent. Do some research and check online reviews to see if other customers have had problems with that particular lender.

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