The Importance of Comparison Loan Shopping Explained

Loans help consumers every day in a variety of ways. They help consumers to make investments, to start their own businesses. They help the consumer to cover expenses or purchase a home or vehicle. At one time or another, most individuals will take out a loan to make their financial goals a reality.

Borrowing is commonplace in our economy. However, a consumer should never borrow without conducting adequate research. Loan shopping is essential to finding the best borrowing offer available. Consumers need to compare the offers of different lenders. Agreeing to a particular loan offer without adequate research is never a good idea.

We encourage consumers to learn as much as possible about loan shopping before they get started. Loan shopping is an essential part of the borrowing process. The following is some essential information to help you shop for the best loan out there.

Importance of Comparing Offers Between Lenders

A loan is just like any other product. You have numerous options to choose from. This means you need to shop around to find the best option. It’s good to frequent loan places where different offers are available. These offers can be found both online and offline. Loan shopping is essential before borrowing to optimize your finances.

The terms of the loan you take out should be in line with your goals. They should also be in line with your long-term financial plans. This is why loan shopping is so important. There are a lot of loan products out there that are not going to put you ahead. They may even set you back.

Find the loan that best matches your situation. Do the best you can. Over the long term, your efforts will pay off. If you’re devoted to borrowing smart and paying off your loan on time, your credit score will improve. This will lead to improving loan terms for you in the future as lenders vie for your business.

It’s now time to get started with your loan shopping. You can use the information provided below to find the best borrowing option out there. There are a lot of loans out there. However, they can vary widely in terms of key factors like interest rate and monthly payment. For example, personal loan cost depends on if he is a secured or unsecured loan type. Evaluating all these factors is important.

Understanding the Terminology

If you want to comparison shop for a loan, you need to understand significant loan terms. There are some key vocabulary terms that go along with borrowing a loan. You’ll struggle to effectively compare loan offers if you don’t understand these terms.

You might already understand what these key loan terms mean. However, it never hurts to freshen up your vocab and go over some key concepts of borrowing again. The following are 12 terms to familiarize yourself with before you get started.

Amortization is a simple term that sounds more complicated than it is. You might hear the term amortization when you’re shopping for a loan. The term simply refers to repayment where payments are equally divided up according to how much the borrower owes. Amortization spaces these equal payments out over a certain period of time.

The annual percentage rate is a term that refers to the interest rate on the loan in question. This term is used by basically every lender. It describes the expense of a loan. The APR is one of the number one factors in evaluating a loan. You need to know what the APR on a loan is before deciding whether to borrow.

An application fee is a fee you have to pay just for applying for a loan. Application fees can be expensive. You may still have to pay them even if you’re not approved. Ideally, you want to find a loan that doesn’t involve an application fee.

Collateral is any item of value you use to secure a loan. If you have collateral available to secure a loan, it will be easier to find financing. Collateral could be anything of value. However, it is most often a home or vehicle. Consumers who have struggled to acquire financing should start considering collateral possibilities.

A co-signer can help you acquire the loan you seek. Co-signers back up a consumer’s loan application. They throw their own credit history and income behind a loan applicant. This means that their own credit will suffer if the loan is not repaid. Lenders are more likely to approve a loan applicant with a co-signer. Finding a co-signer is a good option when you’re struggling for loan approval.

7 More Terms


The Default simply refers to an inability on the part of the borrower to repay a loan. Default has negative consequences for the borrower’s credit history.

Deferred Payment

Some loans offer deferred payment features. A deferred payment is a payment made at a later date. A common example of a loan featuring deferred payment is a student loan. Borrowers of student loans usually don’t have to start making payments until they graduate.

Loan Commitment

Loan commitment generally means the same thing as loan approval. It is an offer on the part of the lender for a loan. If you are given a loan commitment, you have been approved for a loan.

This loan commitment should detail how much you can borrow and what the interest costs will be. Usually, a loan commitment will expire after a certain length of time has passed. You need to follow through on a loan commitment pretty quickly or you may lose the borrowing opportunity.

Prepayment Fee

If you are borrowing, you should be aware of whether your lender charges a prepayment fee. When you pay off a loan early, there should be less interest charged on the loan. This means the lender makes less money. Sometimes, lenders address this possibility with a prepayment fee. You should look for lenders who don’t charge repayment fees. This gives you more control over loan costs once repayment begins.

Secured Loan

A secured loan is any loan that involves collateral. Generally, a secured loan is easier to be approved for. However, a lot of consumers don’t have the collateral necessary for secured loans. If you have valuable possessions to use as collateral, you may want to use them to qualify for good loan terms.

Unsecured Loan

An unsecured loan involves no collateral. The borrower qualifies based on his or her credit and income alone. Unsecured loans are best for consumers. They don’t require consumers to risk ownership of valuable possessions. However, unsecured loans usually have stricter credit requirements. This makes them harder to achieve approval for.


Underwriting is a term that refers to the process of laying out terms for loans. The lender uses risk analysis procedures to analyze loan applications and devise loan terms. Underwriting is the key factor behind making decisions on loan applications. If you are not approved for a loan, it is likely because you do not meet the lender’s underwriting terms.

Word LOAN on step stack coins as graph up with banknotes background.

Borrowing Process

When you’re loan shopping, you need to understand how the borrowing process works. The borrowing process could be different with different lenders. Some lenders make things easier than others. These days, many lenders allow prospective borrowers to apply entirely online. However, others will require an interview and an in-person application. When using a loan checker for loan shopping, you should consider these procedures.

Convenience is a big factor when it comes to applying for a loan. You want to look for a lender with a borrowing process that addresses your needs and preferences. You also should understand that you need to take care of some aspects of the borrowing process independently.

Gauging the Market

In particular, the loan shopping process is something you’ll carry out independently. This process is all about evaluating your options. Lenders will be eager to get you to apply. However, you shouldn’t apply indiscriminately. Scope out the best prospects before you apply. Then you can proceed with submitting an application with lenders you think to offer the best deals.

Remember that different lenders cater to different types of consumers. You need to apply with lenders that are best for working with consumers with your credit score and financial situation. The Internet provides you with a lot of information when you’re gauging the market. While you can ask around at banks and credit unions, it’s also a good idea to gauge the market for loans online as well.


Understand what the application process entails for individual lenders. You want to find an application that is not too complicated or involved. There is some standard information that is required in any application. You should have to provide your employment and identity details. However, some lenders might require more. They may require references. Many also run criminal background checks. It’s a good idea to understand what will be expected of you when you apply.

Of course, you want to go with the lender providing the simplest and fastest application procedure possible. In addition to acquiring about the application procedure, you also should know how soon after applying you will receive loan funds. Many borrowers want to receive their funds as quickly as possible. This is an important consideration because some lenders could require you to wait for a week or more before receiving funds.


Of course, getting approved for the loan and receiving the funds is only part of the procedure. Repaying is a big part of the borrowing procedure. The ideal lender will accommodate your needs during the repayment phase. Helpful features lenders can offer during repayment include permitting an occasional missed payment or deferring repayment.

Qualifying for a Loan

When you’re loan shopping, you need to find loans you can qualify for. Before you even apply for a loan, you can usually get a good idea of whether you’ll be approved. Understanding factors lenders evaluate helps you understand your chances of approval. While lenders vary in terms of their underwriting, they tend to focus on the same factors. The following are the three main factors they’ll look at.


You probably already know that your credit type is an important determining factor when you’re loan shopping. Yet you may not realize that some lenders cater to those with poor credit. Consumers are routinely surprised at being approved for loans despite poor credit. Even if you have poor credit, you can probably find a lender who will offer you a loan. The only drawback is that your interest rate may be high. You need to shop around more with poor or fair credit to find reasonable rates.


Your income is going to be evaluated by most traditional lenders. You may need to meet basic income requirements to be approved. This is the case with most loan types. You need to find a lender who will loan money to consumers in your income range. If you struggle with income requirements, perhaps you can increase your income before borrowing. Taking on a second job or receiving a raise can increase your loan worthiness.


You might still be able to find a loan if you have poor credit and low income. Usually, this is possible with loans requiring collateral. Lenders of traditional loans might not offer secured loans or concern themselves with collateral. However, some lenders offer only secured loans. If you want to qualify for a loan based on collateral, do business with lenders of secured loans.

Lenders offering secured loans will typically have certain requirements for collateral. They may use home equity or vehicles as collateral. However, the equity or vehicle has to be worth a certain amount of money. You may also be able to find loans using expensive possessions like jewelry or even stock ownership as collateral. You need to do a lot of loan shopping to find these borrowing opportunities.

Improving One’s Finances by Borrowing

The ultimate goal of borrowing should be to improve one’s finances. You’re going to have to pay back the money you borrow. Therefore, you don’t want to take out a loan that will damage your budget. Loan shopping is so important because you need to find the loan that is best for your finances. You don’t just want to find any loan you can qualify for.

Keeping the following in mind can help you with loan shopping that improves your finances.

You should set some goals when you borrow. You should have a goal for what your finances will look like when you repay the loan. This will help you stay disciplined regarding spending as you repay your loan. Goal setting is the best way to improve your finances. If you want to borrow, it means you have less money than you’d like to. This means there’s room for improvement in your finances. Set goals to achieve that improvement.

Too many consumers borrow without thinking things through carefully. This is why they struggle financially. Any time you borrow, it’s good to set a budget. Do some calculations to figure out the amount you can afford for a monthly payment.

Don’t jump into a loan unless you’ve prepared adequately. At all times, you should have a budget in place. This budget should detail your expenses and your income. It should also be setting some money aside to go into your savings each month.

Setting goals and creating a budget isn’t all you should do. You should also have more long-term plans in mind. Looking ahead is important for your finances. Your long term goal could be homeownership. It could be completely getting out of debt. It could be starting your own company. Whatever your long-term plan is, you should have one and stick to it. This will give you focus regarding your borrowing and budgeting.

In Conclusion

It takes an effort to optimize your finances. Part of that effort is being informed each and every time you borrow. Loan shopping is all about being informed regarding available financial products. You should now be aware of what the important terms are to understand in order to choose the right loan. You have enough information to understand any loan offer you receive.

Once you’ve done some research, it’s good to get some loan estimates. Those offering loans can evaluate your credit score and income. They can then provide an estimate. Apply with the lender offering the best estimates according to your needs. Then, you will be one step closer to making that purchase or investment you have in mind.


How Does A Personal Loan Effect Your Credit?

How Does A Personal Loan Effect Your Credit?

There are several things you need to consider before you get any type of loan and this includes the impact the loan will have on your credit. However, the primary determinant for this aspect is your credit profile. Sometimes a personal loan can help improve your credit scores and credit, especially if your primary purpose of taking a personal loan is to help pay your existing higher-interest rate debts. Before we can dive deeper into this issue, it is important to know what the definition of a personal loan.

Understanding the link between your credit score and personal loans requires you to know what a personal loan is first.

How a Personal Loan Affects Your Credit

A personal loan is a type of credit issued by credit unions, banks, or digital lenders. This type of credit makes it easy for people to make big purchases, bundle high-interest debt into an easy to manage low-interest debt, or start a business. A personal loan usually has a lower interest rate compared to credit cards. These types of loans can also be used to combine several credit card debts into monthly lower-cost payments.

While your credit profile can be a robust tool, signing off on any loan especially a personal loan can certainly be a serious obligation. Thus, it is important to weigh both the pros and cons of a personal loan and how it will affect your credit score.

Let’s see when a personal loan can affect your credit history and score.

You Apply for a Personal Loan

A formal application of a personal loan triggers a thorough credit check that enables the loan checker to perform an evaluation of your credit history. This type of inquiry usually takes away at least five points from your credit score. However, the new application accounts for at least 10% of your total credit scores. A thorough credit inquiry basically stays on your report for at least two years, but it can only affect your credit score during the first year.

You Shop Using a Personal Loan

A majority of online lenders allow borrowers to pre-qualify for a consumer loan using a soft credit check. This type of check is routine, as it allows them to establish your creditworthiness. A soft credit check will not affect your credit history and score, but it does allow you to shop around different online lenders for the best terms and rates. Loanry helps borrowers find a lender online.

You can do so, by simply visiting their website, as Loanry makes some of the information you require for registered online lenders available. Make sure you are not only comparing multiple lenders, but you are also considering whether the lender offers its consumers the soft check.

You Repay Your Personal Loan Regularly

Both VantageScore and FICO, which are the different credit scoring methods available, consider your payment, as the most critical factor when calculating your credit score. Your ability to repay your loan makes up 35% of your total credit score. Having a consistent record for on-time debt payments helps build your credit score in the long-term.

Most online lenders report their borrowers’ repayment activity to at least one or all the three national credit bureaus. These bureaus are TransUnion, Equifax, and Experian. Working with an online lender that reports your repayment progress to one or all three bureaus means that you have to be consistent with your payments, as this will help build your credit score and reports.

You Consolidate Your Debt

Consolidating your debt into a consumer loan can help improve your credit score, as it lowers your credit utilization. This means a personal loan affects your credit score in a positive manner. To determine your credit utilization, lenders simply calculate how much available credit you utilize. Personal loans help add installment credit to your reports, and this further helps to improve your credit score

Credit utilization formula.

You Miss a Payment

Another way a personal loan affects your credit is when you lack to make regular payments. However, it is important to note that missing a payment due date even by a few days cannot affect your credit score. But, when you make a payment towards your personal loan that is 30 days late, online lenders may report you to credit bureaus and this can damage your credit score.

For instance, if you have a FICO credit score total of 780, a 30-day delay in paying your personal loan can lower your score by at least 90 to 110 points. This means you will have moved from an excellent score to a fair credit score. Having a suitable budget that takes into account all of your required repayments including a personal loan, can help you avoid missing payments.

So, what happens when a personal loan effect your credit? Are there any ramifications that follow? The next section will focus on how your credit score affects your life.

How Your Credit Score Affects Your Life

Just like a personal loan affects your credit; your credit score can also affect your life. Even if you have a credit score that is as low as 500, you can still get credit, however, this comes with a rather high-interest rate or specific conditions like getting a secured credit card or depositing money. But as your credit score increase, you start to have even more access to available credit products that have lower interest rates and pay less.

For instance, if you have a credit score of 620, you would pay a range of $65,000 to $200,000 for a 30-year mortgage. While a person with a score of above 760 will pay less than that for a shorter period. In the long run, borrowers with a credit score of above 760 have plenty of options including 0% interest credit cards and they qualify for 0% financing on vehicles, as well.

How do You Improve Your Credit Score?

After discovering how a personal loan affects your credit, what next? Well, if the impact is a bad credit score then their several ways you can try to improve your credit score. But, if it had a positive impact on your credit score, there is no harm done, by having a higher score. So, here are some of the ways you can improve your credit score.

Sometimes, credit history reports can be notoriously inaccurate. But, it is important to note that this might not be the fault of any of the credit bureaus. Credit bureaus maintain accurate credit records and they report the information they acquire from different lenders. But, the trouble is that, they can sometimes get information from lenders that is not right. This reason may arise if files get mixed up and this eventually causes mistakes during the data entry process.

Checking your credit score by reviewing reports from credit bureaus enables you to check for inaccuracies. Once you have established a mistake has been made, you can then file a dispute. Disputes to credit bureaus are made online and it follows dispute procedures for each bureau. Fixing these mistakes is an excellent way of improving your credit score.

Like discussed earlier, one of the ways a personal loan affects your credit is when you miss your payments. To help fix your credit score, you can try disputing all your late loan payments even if they may be accurate. When lenders report late payments, the credit bureaus require them to verify the information they present, and this can sometimes take time.

If the lender fails to respond within the given time, the bureaus will then remove the negative information from your report. But, if this does not help you get rid of your late payments, you can try negotiating with your lender to put your late payment information on your history rather than credit score. If your online lender agrees, they can easily change your payment information with the help of credit bureaus.

To avoid late payments make sure you try paying off all your debts, making big payments if possible, or bringing the account current. Doing this in exchange for the removal and correction of all your late payment information, is an incentive no lender can refuse. Alternatively, you can try to get your lender to accept a particular amount of money and this will have your account show, closed and paid as agreed on your credit history.

Nobody constructs a house unless they have a plan. To improve your credit, you also require a plan that will show you just how to improve your score. The first step of your plan should be signing up for a credit tracking system. This will help you know your score. The next step should be cleaning up your credit report. Cleaning up your report requires you to make sure that all the information in your report is accurate.

Once that is done, the next step is reducing spending, coming up with a budget, and dealing with your older debts. For instance, if you are using a credit card to buy things, then you are spending too much. Try using cash only instead, or try carrying one credit card. This will keep you from overspending. Also, when you run out of cash, try to stop spending. This will make it easy for you not to spend money, you do not have.

Also, avoid taking personal loans if you are not sure you have the finances to pay back the loan. If you cannot handle paying back your loan you already have, make sure you do not add even more debt by taking a personal loan.

Types of Personal Loans

There are primarily two main types of personal loans and they are:

Unsecured Loans

These are personal loans that do not require any collateral. The lender makes a decision as to whether you qualify for a loan based on your credit and financial history. If you do not qualify for this type of loan or one with lower interest rates, the next option is applying for the second type of loan.

Secured Loans

These are personal loans that require collateral like a savings account. In the event that you are unable to pay back the loan, your lender has the right to acquire your assets, as a form of payment for your loan.

However, most of the personal loans available are unsecured and since the lender cannot possess your assets, this why the loan interest rates of personal loans tend to be higher compared to loans that require security.

How to Apply for a Personal Loan?

Applying for a consumer loan is a fairly simple process, especially when working with online lenders. Online lenders make it their priority to speed up your application process and avail the money to you within a short time. However, before settling for a particular lender, it is important that you check their terms, as this will make it easier for you to determine their charges and interest rates.

The fact that every online lender has its own loan structures and customized rates means that you have to first shop around for a rate and loan that is convenient before settling for one. Once you are ready to apply, your chosen lender will want to understand your financial situation first. This will help them determine whether to grant you the loan or not.

For this, the online lender will ask you to provide different types of information about your financial state and yourself. Some of the factors they require include:

When you make an official application— as opposed to a qualification request, the online lender will have to perform a background check and

learn more about your credit history and score. Most online lenders have a specific credit score they require from their applicants in order for them to lend you the money you require.

People with high credit scores are always eligible for higher loan limits with a better rate. Individuals with longer credit history also fare well when it comes to getting the best loan limits.

Your online lender may ask for employment and income information in the form of pay stubs, tax returns, or W-2s. For specific reasons, lenders tend to feel confident lending to people with a steady and solid income.

To determine this ratio, online lenders tend to use a key metric, which helps them predict a person’s ability to pay a loan back. The ratio indicates your debt amount compared to your income. If your ratio is at 50% or lower than that, then you are in a good position to not only acquire a loan but to pay it back, as well.

To ensure that the entire process is thorough, some online lenders may also ask for phone consultation after your first application. Speaking to an applicant is useful; as it helps, you understand the technicalities of your application and repayment process. You also get to have your questions answered.

But, it is important to note that, the amount of time you take to finally get a personal loan varies across institutions. For instance, banks take longer compared to online lenders. Online lenders can sometimes give you an offer within a few days of your application and provide funds, as well.

After learning, everything about personal loans, the next section is discussing how a personal loan affects your credit.


It does not matter how a personal loan affects your credit score, the important thing is that you still have the ability to improve your credit score. And all it takes is:

  • Correcting all the errors that appear on your credit report
  • Fixing all the delinquent accounts you have by trying to pay them off, as this will help the lender get rid of any negative information on your credit file.
  • Pay down all your debts, as this will help improve your payment ratio.

Do not let a personal loan affect your credit in a negative way, you have the power to improve your score.