How to Compare Personal Loan Offers
To compare personal loan offers, line them up by APR, the net amount you will receive after fees, the monthly payment and the total you will repay over the full term. APR is the best single number because it includes fees, but the total cost tells you what the loan really costs. Check your rate with two or three lenders using soft inquiries before you apply anywhere.
The quickest way to compare personal loan offers is to put them side by side and look at four things: the APR, the amount you will actually receive after fees, the monthly payment and the total you will repay. APR is the best headline number, but the total cost is what comes out of your pocket.
This guide walks through each part of an offer, shows a hypothetical worked example and lists the questions to ask before you accept.
Start by getting real offers, not advertised rates
Advertised rates are ranges. The rate you are offered depends on your credit profile, income, existing debts, loan amount, term and state. So the first step is to get personalized offers.
Most online lenders let you check your rate with a soft credit inquiry, which does not affect your credit score. Lenders such as SoFi, Upgrade and Happen Bank (formerly LendingClub) offer this. Marketplaces such as Credible and LendingTree can show offers from several lenders with one form. Neither is a lender; the lender you pick sets the final terms.
Lenders also differ on when the hard inquiry happens. Happen Bank's site, for example, says the hard inquiry only appears on your credit report if and when a loan is issued, while others run it when you submit the full application. Check each lender's site for how its process currently works. Our guide to soft vs hard credit checks explains the difference.
The five parts of every offer
Every personal loan offer has the same building blocks. Once you know what each one does, comparing becomes much easier.
| Part of the offer | What it means | What to check |
|---|---|---|
| Interest rate | The cost of borrowing, before fees | Fixed or variable (most personal loans are fixed) |
| APR | Interest rate plus certain fees, as a yearly rate | Use this to compare lenders |
| Origination fee | One-time fee for making the loan | Is it deducted from the loan amount? |
| Term | How many months you have to repay | Longer terms usually mean more total interest |
| Monthly payment | What you pay each month | Can you afford it with room to spare? |
Interest rate vs APR
The interest rate and the APR are not the same thing. If a lender charges an origination fee, the APR will be higher than the interest rate. Two offers with the same interest rate can have very different APRs.
Always compare APR to APR. If one lender quotes only the interest rate, find the APR in the loan disclosure before you decide.
Origination fees and the net amount
Many lenders charge an origination fee and deduct it from the loan. That means you receive less than the amount you borrow, but you repay the full amount.
If you need a specific sum, for example to pay off a credit card balance in full, check the net amount on each offer. Some lenders let you request a slightly larger loan to cover the fee, but that adds to your cost.
Not every lender charges this fee. PenFed, for example, says on its site that its personal loans have no origination fee. Check current terms on each lender's site.
Term length
A longer term spreads repayment out and lowers the monthly payment. It also means you pay interest for longer, so the total cost usually goes up. Some lenders also set different rates for different terms.
The best term is usually the shortest one with a payment you can comfortably manage every month, including in a tight month.
A hypothetical worked example
The numbers below are hypothetical and chosen only to show how the comparison works. They are not offers from any real lender.
Imagine you want to borrow a hypothetical $10,000 and you receive two offers:
| Hypothetical offer | Offer A | Offer B |
|---|---|---|
| Interest rate | Lower | Slightly higher |
| Origination fee | Yes, deducted from loan | None |
| Net amount you receive | Less than $10,000 | $10,000 |
| APR | Higher than its interest rate | Same as its interest rate |
| Term | Same | Same |
Offer A looks cheaper at first because of its lower interest rate. But once you add the origination fee, its APR may end up higher than Offer B's. You would also receive less money up front.
The way to settle it is to compare three things: the APRs, the net amount you receive and the total you will repay over the full term. Your loan disclosure shows the total of payments. Use those figures rather than the headline rate.
Look beyond cost
Two offers with similar APRs can still be very different loans. These features can make a real difference over a multi-year term:
- Autopay discounts. Some lenders, including SoFi and PenFed, offer a rate discount for automatic payments. Check whether your quoted rate already includes it.
- Direct payment to creditors. For debt consolidation, lenders such as Upgrade, Happen Bank (formerly LendingClub), Achieve and Best Egg can send funds straight to your creditors.
- Joint applications. Some lenders let you apply with a co-borrower, which may help you qualify. Both of you are then responsible for the debt.
- Hardship options. SoFi, for example, publishes an unemployment protection program. Ask any lender what happens if you lose income.
- Prepayment rules. Many lenders do not charge a penalty for paying early, but check your agreement.
- Payment date flexibility. Being able to move your due date can help you line up payments with payday.
Questions to ask before you accept
Before you sign, make sure you can answer each of these from the loan disclosure:
- What is the APR, and is it fixed for the whole term?
- Is there an origination fee, and is it deducted from the loan?
- How much will I actually receive?
- What is the total of all payments over the term?
- What are the late fee and returned-payment rules?
- Can I pay the loan off early without a penalty?
- What help does the lender offer if I hit financial hardship?
If any answer is unclear, ask the lender before you accept. Do not rely on a comparison site, including ours, for final figures. The lender's disclosure is the document that counts.
Red flags when comparing offers
Walk away from any offer or website that promises guaranteed approval, asks for a fee before the loan is funded, pressures you to decide immediately or asks for payment by gift card or wire transfer. Legitimate lenders disclose the APR and fees before you sign, and they never guarantee approval before reviewing your application.
Where to go next
See how we score each lender on our personal loans ranking, and read our How We Rank page for the full methodology. If you are deciding between two lenders, our head-to-head pages compare them directly, including SoFi vs PenFed, Upgrade vs Upstart and SoFi vs Upgrade.
Remember that rates, fees and approval are always set by the lender. Check your rate on each lender's site and read the current terms before you apply.
Frequently asked questions
What is the most important number when comparing personal loans?
APR is the best single number because it combines the interest rate and certain fees, such as origination fees. Also check the total repayment amount and the net amount you will receive, because those show the real cost and whether the loan covers your needs.
How many personal loan offers should I compare?
Two or three is a practical minimum. Most online lenders let you check your rate with a soft credit inquiry, so comparing several offers does not affect your credit score.
Is a lower monthly payment always better?
No. A longer term lowers the monthly payment but usually increases the total interest you pay. Pick the shortest term with a payment you can comfortably afford.
Should I accept the first offer I get?
It is rarely a good idea. Offers vary between lenders for the same borrower, so checking a few lenders or a marketplace first gives you a better chance of finding a lower total cost.