A personal loan, sometimes called a signature loan, is typically an unsecured loan extended by banks, credit unions, peer-to-peer lenders and credit card companies. Amounts range from 1,000 up to $35,000. They're designed for people who need immediate cash to meet an emergency, consolidate bills, or make a major purchase. Terms are from one to seven years and lenders charge higher interest rates than those offered on personal loans secured by collateral.
When comparing offers on personal loans at LendingTree, consumers will discover the best rates are given to borrowers with at least a 740 credit score. However, many peer-to-peer lenders will take on borrowers with scores as low as 640. Here are 8 common ways to land a personal loan:
Large retail banks are often the consumer's first choice, but they may not be the best one. Online banks typically offer better rates than brick and mortar institutions and they frequently accept lower credit scores.
2. Credit Unions
Consumers with accounts at credit unions may find a quick turnaround on their loan request. Credit unions may have fewer restrictions on qualifying and offer lower rates than banks.
3. Peer-to-Peer Lenders
Over the last decade, online peer-to-peer lenders have provided personal loans directly from individual investors to borrowers. Depending on their credit, borrowers can get rates as low as 5.5% with a 24-month term.
4. Friends and Family
Borrowing from family and friends can be a tricky proposition. One of the best ways to avoid hard feelings or worse is to request funds that you'll borrow with thorough legal documentation. A standard promissory note (consider free online legal sites) can smooth the interaction, stipulating the repayment terms, interest rate, and all security/collateral (if applicable). The note should also spell out legal consequences for defaulting on the loan.
It can be challenging to find someone to co-sign for a signature loan. They're left holding the bag if the borrower stops making payments. At the same time, lenders are more lenient with applicants with co-signers. A friend or family member may find this method preferable to working out a personal loan agreement with you.
6. Cash Advances
Traditional lenders, credit card companies, and other institutions may offer cash advances or balance transfers at 0% introductory rates, but consumers must check how the interest adjusts after the initial period. Borrowers with poor, fair, and excellent credit can search for card offers at LendingTree.
7. Business Loans
There are unsecured personal loans made for business borrowers who may not qualify for traditional SBA business loans or are seeking amounts so low that lenders won't touch them. Often, personal loans for business are relatively small, up to around $25,000.
8. Secured Personal Loan
Borrowers can improve their chances at getting better rates by securing their loan. Collateral can include property, vehicles, jewelry, stocks, or savings. Be sure to shop carefully when using collateral, and shop competitively.