How to Choose the Right Personal Loan

(StatePoint) When it comes to selecting a personal loan, making the right choice is essential, particularly when you’re in a tight financial spot or have imperfect credit and fewer options.

“It’s important to understand the type of loan you’re getting and the impact it can have on your long-term financial story,” says Chad Prashad, president and CEO of World Finance, a people-focused company providing personal installment loan solutions and personal tax preparation and filing services.

Serving millions of customers nationwide, World Finance helped more than 225,000 customers raise their credit score out of subprime and deep subprime in the last year, and is offering the following insights into obtaining a loan prudently.

Loan Types

There are dozens of personal loan variations out there, but for borrowers with no credit or imperfect credit, there are three basic types to know.

• Pay day loans are typically for smaller amounts of money to be paid back in a lump sum on the next pay day. Customers are often required to provide a post-dated check for the loan amount that the lender can automatically cash. While lenders don’t consider a borrower’s overall financial picture or ability to repay the loan, making them easy to acquire, these loans are notorious for having extremely high interest rates. Plus, your credit won’t be improved with timely repayment.

• Title loans offer higher loan amounts and the length of repayment periods vary. Obtained by posting an important asset (i.e. car title, mortgage) as collateral, you risk losing the asset and more if you can’t repay the loan and its high interest rates (usually well over 100 percent). Like with pay day loans, your credit won’t be improved with timely repayment.

• Personal installment loans let you borrow a set amount of money (usually $500-$5,000) and then pay it back in equal monthly installments over the life of the loan (typically four to 46 months) with accumulating interest. Installment lenders work with borrowers to figure out the best monthly payment amount so that borrowers have enough funds left to cover essential monthly expenses.

These loans typically come with lower interest rates, and, because the lender reports payment behavior to credit bureaus, also offer the opportunity to build credit and long-term financial stability. To learn more about installment loans versus pay day and title loans, visit

Next Steps

Before applying for any loan, read the fine print for interest rate, fees or prepayment penalty details. A bit of research can also clue you into whether you’re dealing with a reputable lender. Reputable lenders will have a phone number and legitimate physical address that can be verified on Google and the Better Business Bureau. All lenders and brokers are required to register in the states where they conduct business, so look for a state license.

Beyond these basics, prioritize a track record of honesty and customer success. Talk to trusted friends or colleagues who’ve been through the lending process. Lastly watch out for red flags — reputable lenders will never call or email you out of the blue with offers.

Free educational tools on financial subjects are offered by World Finance. To learn more and take the American Financial Services Association’s MoneySKILL online course, visit

“While acquiring a loan can be stressful, being able to turn obstacles into opportunities should be the cornerstone of any financial decision,” says Prashad.

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