Dear Personal Loan Adviser,
I want to consolidate my credit card debt, but I don't have enough equity in my home to do it with a home equity line of credit, or HELOC.
I'm considering using a personal loan instead. Should I get a personal loan online or go to a bank for a bank loan?
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What are the pros and cons?
-- Connie Consolidates
I'd have you focus on where you can get the best overall terms, which includes both the interest rate and the length of the loan, and less on whether the lender has a branch in your area.
When you're using a personal loan to consolidate debts, a longer term gets you lower monthly payments, but you'll have a higher interest rate.
You also want to know about the fees and expenses associated with your personal loan. They may include loan origination fees, loan transaction fees or loan prepayment penalties.
Dodge lead generators
What you want to avoid online are companies that are just lead generators for lenders and not actually in the business of lending money to consumers.
One lead generation site actually had this disclaimer: "The operator of this website is not a lender, does not offer loans of any kind or make credit decisions."
Cut out the middleman. You want to control the personal loan application decision and not let others control it for you.
Don't make too many applications
While I'm all for shopping for lenders, with personal loans you have to be careful not to fill out multiple loan applications. Each time you apply for a loan, it shows up as a credit inquiry.
A credit inquiry stays on your credit report for 2 years but impacts your credit score only in the first year. Multiple credit applications hurt your chances to get approved for a personal loan. Limiting your personal loan applications to 1 or 2 lenders is best.
I'd suggest using myBankrate to get a free credit report and score. That will help when you're shopping lenders, because they'll be able to give you a rate indication based on your credit score before you apply for their loan.
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