10 Best Personal Loan Companies

Put simply, they’re non-traditional lenders. Some third-party lenders will loan you the money directly, while others act as brokers, comparing the lending market for you and offering you a range of loans and rates before matching you to an appropriate source. 

Third-party lenders don’t just work with personal loans, though. They can usually offer help with mortgages, student loan debt, credit cards, and consolidating your different debts into one single. monthly payment.

There are actually a number of similarities between third party lenders and banks. Both will carry out a credit check, assess your ability to repay loans, and ask you questions about your current financial state before making an offer. However, third-party lenders have quite a few advantages over banks, such as: 

• They’re faster: You won’t need an appointment and can apply for a loan quickly online. Applications are often completed in minutes and approvals can be as fast as within 24 hours. Once approved, some lenders can get the money to you in just one business day, but between one and seven days is the standard. Banks often employ much stricter review procedures before they'll lend, often wanting to examine your financial transactions going back several years. All of this takes time and they just can’t compete with third-party lenders on speed. 

• They could help you out if you have bad credit - If you’ve been turned down by your bank due to a bad credit rating, a third party lender may be able to help. Loan aggregators will compare loans from across a wide range of different lenders, each of whom will have different credit score criteria. Where you may be rejected by one, they can quickly find another that will likely accept you. 

• Potentially lower interest rates - Having access to a wider range of lenders means more offers to choose from. Healthy competition in the market means lower interest rates too. It isn’t always a guarantee that you’ll find a lower interest rate than with banks, but it never hurts to shop around.

Some people hold the misconception that getting a loan via a third-party lender is somehow access to easy money. This is because the lending process is often easier and quicker than using banks. However, taking out a loan is always a big decision and it will always come with risks associated with it. 

Always remember to read the fine print, don’t rush into the first loan you’re offered and keep your eyes open for the following risks: 

• Origination fees - This is just the fancy term for any upfront fees charged by the lender. These fees are partly to cover the admin costs of setting up the loan but also constitute part of the lenders own income. These fees vary wildly between providers. Some may charge between 0.5% and 1% of the entire loan value, while others can be much higher. If you shop around you’ll be able to find lenders that don’t charge any origination fees at all. Any reputable lender will make these fees very clear at the outset, though. 

• Understand your interest rate - Interest rates are another big variable. Two people could apply for the same loan amount, from the same company, and come out with two completely different interest rates. Lenders factor in individual circumstances for every loan. The higher the risk they think you are, the higher the interest you’ll pay. Always ask to see the total amount you’ll pay over the lifetime of the loan. This will give you a good idea of how much interest you’ll actually be paying. If it’s too high, shop around for a better rate. 

• Early repayment penalties - The longer you take to pay off your loan, the more interest a lender makes on it. Lenders don’t want you paying off your loan early and many will have early repayment clauses written into the loan contract. You should always try to pay down your debts as quickly as possible, so check with your lender to see if they’ll penalize you for doing so. Again, any reputable lender should make these charges very clear from the outset. 

• Payday loan risks - These types of third-party lenders will loan you money on the promise of a portion of your next paycheck. The interest rates are incredibly high and if you’re unable to make the payments you can get trapped in a cycle of debt. Only take this type of loan if you’re absolutely certain you’ll be able to make the repayments.

Secured loans 

With a secured loan, you make a promise to give up a chosen asset in the event you can’t repay the loan. This could include things like your car, promise of money in a savings account or a certificate of deposit. These are a lower risk for the lender as they’re pretty much guaranteed to get their money back one way or another. They can be useful for borrowers as secured loans usually come with lower interest rates. These work well for those with low credit ratings too, and a good way for you to build credit. Many lenders will be happy to discuss secured loan options with you. Of course, though, if you don’t pay, you’ll lose the assets you’ve nominated. 

Unsecured loans

These tend to be the more common type of personal loan you’ll see. These loans aren’t secured against any of your assets or possessions, meaning if you default on your payments, the lender can’t take any property from you because it wasn’t specifically named as collateral. However, there are some downsides to using unsecured loans. As these present a higher risk for the lender, they tend to have higher interest rates, meaning you’ll be paying more in the long run. Also, missing any payments has a significant impact on your credit rating, making it very difficult to apply for other types of credit in the future.