Seven Questions to Ask When Evaluating Personal Loan Options
Taking out a personal loan too hastily could lock you into unfavorable terms with an untrustworthy lender. These are the questions to ask before signing on the dotted line.
Whether you’re planning to consolidate credit card debt, renovate your home or embark on a dream vacation, personal loans can be a powerful tool to help you achieve your financial aspirations.
However, not all loans — or lenders — are created equal. Carefully choosing the right loan can help set you up for success. It requires asking the right questions to ensure your loan fits your needs, aligns with your goals and comes from a trustworthy provider.
To help you make confident and informed choices, here are seven essential questions that Americans should ask when evaluating personal loan options.
From just $107.88 $24.99 for Kiplinger Personal Finance
Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special Issues
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
1. How will it affect my credit rating?
When you apply for a loan, your credit will typically be checked through either a "soft pull" or a "hard pull." A soft pull, often used during the initial application process by some lenders, doesn’t affect your credit score or appear on your credit history.
However, once you accept a loan, a hard pull is usually conducted, which may temporarily impact your credit score and will appear on your credit report. It’s important to verify that a lender’s initial application process involves only a soft pull to avoid any unnecessary impacts to your credit score during the evaluation stage.
Be diligent in understanding how each step of the process may affect your credit.
Additionally, personal loans, classified as installment credit, can complement revolving credit like credit cards and help diversify your credit profile.
Using a personal loan to pay off credit card debt, for example, may lead to an improvement in your credit score when managed responsibly.
2. What should I know before taking out a loan?
A personal loan is not free money — it’s a financial commitment. Take the time to understand interest rates and loan terms, and how factors like credit history and debt-to-income ratio can impact your loan eligibility.
Educating yourself about these elements helps ensure you’re choosing a loan that fits your situation and goals.
3. How quickly do I need the money?
Timing matters. Online lending platforms often offer faster application and approval processes than traditional brick-and-mortar banks.
Some of these platforms will facilitate loan funding in as little as one business day after final approval, depending on your bank’s transaction processing speed.
4. Is this lender trustworthy?
Research is key to finding a reliable lender. Consumers can visit the local or regional Better Business Bureau (BBB) website or call to find customer feedback and complaints about lenders or lending platforms based in their communities or home states.
Similarly, they can explore the Consumer Financial Protection Bureau (CFPB) website and search its Consumer Complaint Database for customer complaints filed with that organization about specific lenders.
A quick online search on sites like Trustpilot can also reveal customer experiences and help you avoid untrustworthy providers.
5. Can I afford the monthly payments?
Borrowing beyond your means can make your financial situation considerably worse. If you accept a loan with a monthly payment that is more than you can manage, you can quickly rack up penalties and late fees and increase your risk of default.
Review all loan costs, including fees like origination fees, and ensure the monthly payments fit comfortably within your budget.
6. What are the repayment terms?
Depending on the size of the loan, it may take months or several years to repay it. The length of your loan term affects both your monthly payments and total interest.
Shorter-term loans have higher monthly payments, but the total interest paid will be lower when compared to longer-term loans.
Carefully review a loan’s terms, including length, payment schedule, the total interest or finance charge and any penalties, during your evaluation process. Choose terms that align with your budget and financial goals.
Also, check to see if the lending platform offers any hardship programs if your circumstances should change during loan repayment.
7. Is this the right financial option for me?
Personal loans are versatile but may not always be an ideal choice for your situation and financial goals.
For example, if you’re a homeowner, a home equity loan or line of credit could offer better terms than a personal loan. Take the time to shop around and figure out what solution best aligns with your financial circumstances, needs and other factors.
While personal loans can help you achieve financial milestones — whether it’s paying off and consolidating debt, covering emergency expenses, or making home renovations — they are just one piece of a larger financial puzzle.
The path to improving your financial well-being requires an ongoing commitment to manage your spending and saving habits. Remember to ask the right questions and choose a loan that supports — not hinders — your journey to financial success.
Related Content
- The Power of Living Within Your Means
- Considering a 401(k) Loan? What You Can Do Instead
- Top Five Benefits of Peer-to-Peer Lending
- Six Tasks That Can Help You Feel Better About Your Money
- Need Help Digging Out of Debt? What You Can Do
-
Does Your Car Insurer Need to Know All Your Kids? Michigan Cases Raise QuestionWho you list on your policy matters more than most drivers realize, especially when it comes to who lives in your home.
-
Your Parents' Retirement Plan Won’t Work for You (The Stats Are In)Five stats show how you need to rethink retirement, because "the future ain’t what it used to be."
-
Has the New Tax Law Killed Roth Conversions for Retirees?The OBBBA's permanent lower tax rates removed the urgency for Roth conversions. Retirees thinking of stopping or blindly continuing them should do this instead.
-
Does Your Car Insurer Need to Know All Your Kids? Michigan Cases Raise Question
Who you list on your policy matters more than most drivers realize, especially when it comes to who lives in your home.
-
Are Roth Conversions for Retirees Dead in 2026 Because of the New Tax Law?
The OBBBA's permanent lower tax rates removed the urgency for Roth conversions. Retirees thinking of stopping or blindly continuing them should do this instead.
-
Worried About Retirement? 4 Tasks to Calm Your Nerves and Build Confidence, From a Retirement ProIf you're feeling shaky about your finances as you approach retirement, here are four tasks to complete that will help you focus and steady your nerves.
-
Financial Success Isn't Just About What You Save, But Who You Trust: Who's in Your Driver's Seat?For financial success in 2026, look beyond the numbers to identify the people who influence your decisions, then set them realistic expectations
-
Small Caps Can Only Lead Stocks So High: Stock Market TodayThe main U.S. equity indexes were down for the week, but small-cap stocks look as healthy as they ever have.
-
Is Direct Primary Care Right for Your Health Needs?With the direct primary care model, you pay a membership fee for more personalized medical services.
-
Smart Ways to Share a Credit CardAdding an authorized user has its benefits, but make sure you set the ground rules.
-
How the Stock Market Performed in the First Year of Trump's Second TermSix months after President Donald Trump's inauguration, take a look at how the stock market has performed.
