Some factors to consider when choosing a lender include customer service, reputation, available loan types, fees, and borrower benefits. The best option can depend on the kind of loan the borrower needs, the borrower’s credit rating, and current economic conditions. One thing to consider is the potential to refinance a loan in the future; people with an interest in this option may want to do some research to find out how easy it will be. Student loans, for example, can often be readily refinanced with minimal work, while mortgages can be more difficult.
The first consideration is the kind of loan the borrower needs. Loans to assist with business costs, help people buy homes or cars, or pay for college are available. Some lenders specialize in specific types, and may not offer all loan options. It may help to assemble a list of lenders in a region to start comparing interest and fees, looking for a lender with the best available terms. Bigger is not always better; sometimes a community bank or credit union may have better rates.
Borrowers may also want to think about the customer service. Employees should be friendly and helpful in person and on the phone. If online or phone loan servicing is an important feature, it is advisable to make sure it is available. Reputation can be another consideration; people preparing to take out loans may want to ask around their communities to see if a company is known for being difficult or unpleasant to work with.
A specialty lender can sometimes offer the best rates on mortgages, student loans, and car loans. When talking to such lenders, prospective borrowers can ask for sample loan contracts and details on the terms of the loans offered. Some may quote a very low interest rate, for example, in the hopes that borrowers don’t notice it is adjustable, and may increase in the future. It can also help to ask about the different types of specialty loans available, to see if there is a product that will meet a borrower’s needs more effectively.
Loan applications require an inquiry on a customer’s credit record, possibly having an adverse affect on a credit score. For this reason, people choosing a lender may want to think carefully before they request competing quotes on loans. For a large loan like a mortgage, it may be worth filing applications with two or more lenders to see which offers the best terms, because the long-term savings may be worth the minor hit to a credit record. On smaller loans, consumers may want to compare quoted rates and policies without putting in a formal application. They should be aware that the actual loan terms may vary slightly from those quoted for new customers after the lender has had a chance to review the application.
