How to Choose the Right Loan Company for Your Situation
Narrow down your options by comparing minimum credit scores, loan amounts and fees for each lender you're considering. Ask lenders for prequalifications to see what rates you'd be eligible for without hurting your credit score, and read reviews of each lender for insights into the experience other borrowers had with each company.
1. Customer Service
Customers expect excellent customer service from their loan companies, and it’s a key differentiator for lenders. According to a study by CustomerGauge, 89% of customers say that good customer service is an important factor in choosing a lender. And a great customer service experience can help keep current borrowers and attract new ones.
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The best way to provide good customer service is to make it easy for borrowers to interact with your company. This means having a user-friendly website and a responsive, friendly team to answer questions and address concerns. Customers also want to be able to find the information they need easily, so it’s important to be transparent about fees and terms.
One of the best ways to improve customer service is to use feedback from your own borrowers to identify and resolve issues. For example, if your customers complain that the online application process is confusing, use this feedback to simplify forms and make them easier to understand. Similarly, if you notice that many customers are complaining about late payment charges, consider waiving them for borrowers who are experiencing genuine financial hardship.
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Another way to improve customer service is to train your employees thoroughly and empower them to make decisions on their own within guidelines. This will enable them to build trust with customers and quickly resolve issues. For example, if a borrower is having trouble paying their mortgage, your representative should be able to explain the situation and offer an alternative solution.
It’s also important to recognize your team members’ successes. This will encourage them to continue providing exceptional customer service and boost morale. For example, if a borrower’s credit score improves due to timely loan assistance, celebrate this achievement and share the story with your team.
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2. Fees
It's important to understand the fees you might be required to pay when applying for a loan. A number of factors can influence these fees, including the type of financing you choose and the lender itself. For example, some lenders charge a packaging fee to cover the costs of reviewing documents submitted for approval. This fee may also be charged when applying through a third-party platform. Other potential charges include unsuccessful payment or non-sufficient funds (NSF) fees, which vary by lender. Fortunately, most lenders provide annual percentage rates for their loans to help you compare the total cost of borrowing from different providers. This rate will reflect both the company's processing and interest rates. The best loan companies will clearly disclose all their fees before you make a commitment.
3. Interest Rates
An interest rate is the amount you pay to borrow money. Whether you’re borrowing to buy a home, fund a project or expand a business, it’s important to compare rates from several lenders before choosing one. The best rates will depend on your credit score, the purpose of the loan and the length of the term. You’ll also want to consider any additional fees and features such as prepayment penalties or expensive credit insurance add-ons that may increase your APR.
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A good credit score, a history of making on-time payments and a low debt-to-income ratio can help you get the lowest rates. A study by LendingTree found that a higher credit score can save you $22,000 over the life of a mortgage, personal loan or auto loan.
It’s important to look for a lender that provides transparent information about their rates, fees and terms. It should be easy to find the information you need on a company’s website or from reviews online. Additionally, you should be able to easily compare different types of loans and choose the one that makes the most sense for your situation.
4. Collateral
Basically, collateral is something of value that you put down as a form of security for a loan. It helps lenders feel more comfortable extending the loan since it’s something they can use to recoup their losses in the event of a default. This is why most loans require some kind of collateral.
Collateral can be anything from cash to vehicles, equipment, real estate, letters of credit or even a business’s inventory or accounts receivable. The type of collateral you need to provide depends on the type of loan you need, and your lender will have a specific list of acceptable assets.
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If you need a large sum of money to purchase a home or car, for example, a mortgage is a common type of secured loan. Your home or vehicle becomes the collateral here, and if you fail to make your mortgage payments, the lender can repossess the property to get their money back. This is why you need to be careful with these types of loans – if you don’t pay them back on time, you could lose your home or car.
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