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Personal installment loans lock in terms for years, so the details you confirm now shape the whole cost. Work through this checklist before you sign.

This article is general information and isn’t financial or legal advice. Card terms, fees and rules change, so check the issuer’s current terms and official sources such as the Consumer Financial Protection Bureau and the Federal Trade Commission before you decide.

The essentials

1. The APR shows the yearly cost of borrowing, so compare it across lenders instead of the monthly payment alone.
2. Ask for a written list of all fees, including origination, late payment, bounced check and check processing fees.
3. Most personal loans are unsecured, which means no collateral but typically higher rates than secured loans.
4. Never pay an up-front fee that supposedly guarantees a loan; legitimate lenders check your credit first.
5. Read any ACH authorization carefully and confirm it explains how to stop or revoke the payments.

A personal installment loan puts a lump sum in your account at the start and fixes your payments for the life of the loan. The lender sets those terms once, when you sign, so anything you miss in the paperwork becomes a cost you carry for years. Work through this checklist before signing, and use it to compare offers from several lenders on the same footing.

Confirm the APR and What It Includes

Start with the number that makes offers comparable.

• Know what the product is. A personal installment loan is a closed-end loan: you receive all the money up front and repay it in fixed installments, in amounts from several hundred dollars to several thousand or more, over terms of a few months to several years.
• Ask for the APR, not just the rate. APR stands for annual percentage rate, and it tells you how much the loan costs to borrow for one year. Two loans with similar monthly payments can have very different APRs.
• Ask whether the rate is fixed or adjustable. Personal loan interest rates can be either. An adjustable rate means your payment could rise later, so make sure you know which one you are being quoted.
• Check the rules in your state. Interest rates permitted by state law are one of the factors lenders weigh, and limits differ from state to state.
• Try prequalification before a formal application. Many lenders will show you estimated terms first, often with no impact on your credit score. That gives you numbers to compare without a stack of full applications.
• Look at your credit reports first. Lenders lean heavily on your credit history when setting the rate they offer, and mistakes on your reports could push that cost up. If you have not read yours lately, our guide to how to read your credit report goes section by section.
• Gather your documents before you apply. Lenders typically ask for recent pay stubs, bank statements, or tax returns to verify income. If you are self-employed or have irregular income, requirements vary by lender, so ask what documentation they need.

Add Up Origination and Other Fees

The advertised rate is not the only number that matters. Fees change the real cost of the loan, sometimes by a lot.

• Get a written list of every fee. The FTC advises asking the lender to spell out each charge in writing, starting with any origination fee, before you commit.
• Ask how an origination fee is collected. Some lenders deduct it from the money they send you. In a lawsuit, the FTC alleged that one online lender promised consumers a $10,000 loan that arrived as $9,500 after a $500 up-front fee was deducted, even though the company had advertised that there were no hidden fees.
• Ask about fees for common mistakes. Charges for paying late, for a check that bounces, and for processing checks can all appear in a personal loan agreement. Knowing them in advance makes the consequences of a missed payment concrete.

Check for Prepayment Penalties

If you come into money and want to pay the loan off early, the agreement decides whether that actually saves you money.

• Ask directly whether paying early costs anything. A prepayment penalty is a fee some lenders charge when you pay off the loan ahead of schedule.
• Search the agreement for the term. The FTC notes that a loan agreement can include prepayment penalty fees alongside the other charges. If the document does not clearly answer the question, ask in writing.
• Compare this across lenders. If two offers have similar rates but only one carries a prepayment penalty, that difference belongs in your comparison.

Understand Secured Versus Unsecured Terms

• Know which kind of loan you are considering. Most personal loans are unsecured, meaning they do not require collateral such as a house or car.
• Expect unsecured loans to carry higher rates. Because the lender has no collateral to claim if you stop paying, lenders generally charge more interest on unsecured loans than on loans backed by property.
• If collateral is required, name it and price it. A secured loan may come with a lower rate, but the collateral, often a house or a car, is what the lender can pursue if you fail to repay.
• Consider whether a co-borrower makes sense. Applying with someone who has strong credit and finances may improve your chances of approval or your terms. Before anyone signs on, both parties should read Cosigning a Loan: What You’re Really Agreeing To.

Compare the Total Cost, Not Just the Payment

• Multiply the payment by the number of payments. Your regular monthly payment of principal and interest is set by the amount you borrow, the length of the loan, and the interest rate. A longer term shrinks each payment but adds months of interest, so the same loan can cost more overall.
• Calculate your debt-to-income ratio. Divide your total monthly debt payments by your gross monthly income, before taxes, and multiply by 100. Lenders generally prefer a ratio of 36 percent or lower, though some approve borrowers as high as 50 percent, particularly for debt consolidation.
• Ask what happens if you miss a payment. Contact the lender as soon as possible; options may include deferment, forbearance, or a payment plan that lets you postpone payments, make partial payments, or lower the interest.
• Weigh the alternatives first. Selling unused items or using savings can be cheaper than borrowing. For a smaller purchase, pay-in-4 plans work differently from installment loans; see Buy Now, Pay Later: How Pay-in-4 Plans Work and What to Watch for the trade-offs.

Read the Required Disclosures Before Signing

• Read every document before you sign. This sounds obvious, and it is still the step people skip when a lender is waiting on the phone.
• Find the ACH authorization if there is one. This authorization, included in your loan documents, lets the lender take your payments directly from your account without further action from you. It may have a place for you to initial, and you can refuse to sign it.
• Check that the authorization explains how to stop it. Do not sign an ACH authorization that does not clearly state how it can be stopped or revoked. If you already signed one without those instructions, you can still revoke it by contacting the lender, your bank or credit union, or both.
• Know where to complain. If a payment authorization is a problem, you can contact your state regulator or state attorney general, or submit a complaint to the CFPB online or by calling (855) 411-2372. Our walkthrough of filing a CFPB complaint explains what to include.
• Confirm the numbers match what you were quoted. Before signing, check the loan amount, the payment, the term, and the fee list against the offer you accepted.

Print the checklist, pull your credit reports, and bring it to every lender conversation so each offer can be judged line by line.

Questions and answers

Is a personal loan the same as an installment loan?

A personal installment loan is a closed-end loan: the lender gives you all the money at the start and you repay it in fixed amounts over a set period, from a few months to several years.

Can a lender take an origination fee out of my loan?

Some lenders deduct an up-front fee from your proceeds. In a lawsuit, the FTC alleged one online lender promised a $10,000 loan that arrived as $9,500 after a $500 fee was deducted, so ask how the fee is collected.

Do I have to sign an ACH authorization?

No. The authorization lets the lender take payments directly from your bank account, and you can refuse to sign it. If you do sign, make sure it clearly explains how to stop or revoke it.

What should I do if I cannot make a payment?

Contact your lender as soon as possible. Options may include deferment, forbearance, or a payment plan that lets you postpone payments, make partial payments, or lower the interest.