Personal Loans: Where (and Where NOT) to Find Them

 Personal loans are designed to meet many needs, and they can be approved and funded in hours or days, not weeks or months. This makes them ideal for quick infusions of cash. Before you can apply for a personal loan (also called an unsecured loan or signature loan), however, you need to find a lender. Because the terms of this sort of financing vary considerably more than the terms of mortgages, you need to shop wisely and avoid a few rip-offs. Here's how.

The Good!

Personal loans are sold by credit unions, banks, finance companies, peer-to-peer groups and others. You can find and apply for a personal loan online, and the money can be transferred right into your checking account. However, not every product billed as a personal loan is truly a personal loan. Some shady online lenders try to disguise title loans, payday loans or other short-term sharkery as reputable personal financing. Don't be fooled!

The key to finding a good personal loan is to contact reputable lenders only, and then compare interest rates and terms to get the best deal for which you qualify. Here's what to look for:

  • Credit check and income verification required
  • Physical address and phone number that you can verify
  • License to do business in your state
  • Better Business Bureau accreditation
  • Reasonable interest rates
  • Absence of pre-payment penalties
  • Absence of upfront charges like application fees
  • No automatic withdrawal requirement
  • No "optional" fees

Reputable lenders, for example, can be found on LendingTree.com. Answer a few questions and you can immediately compare the offers you receive.

The Bad and the Ugly!

On the other hand, applying for a loan online requires a huge leap of faith. You're providing everything anyone needs to steal your identity (and perhaps empty your bank account), so keep that in mind when you choose a lender. "Real" personal loan lenders charge between five percent and 40 percent interest for most loans (depending on the term, loan amount and your profile), while payday loans billed as personal loans (usually "personal loans with bad credit" or "no credit check") come with rates that exceed 100 percent and sometimes even 1000 percent! They may require you to sign postdated checks, confusing contracts that allow them to hit your bank account when they want, or an authorization in tiny print for an "optional" fee (which they can't legally charge so they try to get you to authorize it). Bad loans may also come with automatic extensions and rollovers that can add hundreds or thousands to your costs.

If you look for a personal loan online, do your homework -- check out lenders' BBB ratings and verify their state licenses, physical locations and phone numbers. Or come to LendingTree and compare offers from our lender partners doing business in your area.

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