Choosing the Best Place To Get a Personal Loan
If you’re looking for the best place to get a personal loan, you have options. Personal loans can commonly be found through banks, credit unions and online lenders. Your financial needs and your credit score can help you narrow the field of potential lenders. Ultimately, the best lender for you will be the one that can offer you the most competitive interest rate and loan terms.
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Bank personal loans
Banks provide a secure and established lending environment, as well as an array of other financial services. If you need quick access to cash, banks offer personal loans with competitive interest rates and flexible repayment terms. As of February 2023, the average interest rate at commercial banks for a 24-month personal loan was 11.48%.
Banks typically have physical branches you can visit if you want a more personal touch for your loan experience. A loan specialist at a bank can walk you through the process and help you find the right product for your needs. Current customers with deposit accounts may get their loan funds more quickly.
However, banks also come with drawbacks. Typically, banks have stricter eligibility criteria, such as a good credit score and solid credit history. Some banks only lend to current customers with deposit accounts, so you may have to open an account before you can access a loan.
When beginning your search for a personal loan, be sure to start with your current bank — it may have exclusive perks for existing customers. Other banks to consider may include Citi Bank, PNC Bank and TD Bank.
Low average interest rates
Physical branch locations and in-person customer service
Better tech experience than credit unions
May have to visit a branch in person
Bad credit borrowers may not qualify
May have to be a current customer to apply
Credit union personal loans
Credit union personal loans offer some of the lowest interest rates because credit unions are nonprofit and member-owned. Annual percentage rates (APRs) — which is how much you’ll pay for the loan including interest and fees — for credit unions are capped at 18% by the National Credit Union Association (NCUA). In contrast, online lenders may have APRs as high as 36%. If you only need to borrow a small amount, credit unions can be a great choice for small personal loans.
Most credit unions, however, require that you become a member before applying for or accepting your personal loan. And in some instances, membership requirements can be strict, such as living within a certain area or having ties to the U.S. military. Since credit unions tend to be smaller institutions, they may offer less access to technology and resources, and they may have more limited customer service hours.
If you’re already a member of a credit union, you may be able to access low rates and few or no fees. Other credit unions to consider include Navy Federal Credit Union, PenFed Credit Union and Alliant Credit Union.
APRs are capped at 18%
May visit physical branches for assistance
Tend to have few to no fees
Often exclusive to credit union members
May have to visit a branch to apply
May have strict membership criteria
Online personal loans
Online personal loan lenders provide credit that can be accessed 100% online. There’s no need to visit a branch — a requirement that some banks and credit unions have. This type of lender often has more flexible personal loan requirements. For instance, it may be easier to access a bad credit loan with an online lender than with a bank or credit union.
The downside with those less strict requirements, however, is that online lenders can have much higher APRs than banks and credit unions. If you have bad credit, you could be stuck paying APRs as high as 36% — the maximum APR financial experts consider affordable.
Online lenders aren’t as tried and true as commercial banks or federal credit unions, but there are a lot of great options out there. Lenders like Happy Money and Reach Financial work with borrowers looking for debt consolidation loans, while LightStream and SoFi provide loans for a wide variety of purposes.
May be more willing to work with bad credit borrowers
Entire application process can be done online
Approvals and funding can be fast
APRs can be as high as 36%
Doesn’t have branches you can visit
Many online lenders charge origination fees
Beware of payday lenders
Payday loans are a type of installment loan that come with predatory APRs, short repayment terms, small loan amounts and no credit checks. These types of loans are marketed to consumers with bad credit who may not be able to access loans otherwise.
Because of their short terms — usually two to four weeks — and high APRs — up to 400% — payday loans can trap you in a cycle of debt. Many borrowers end up having to take out more payday loans to cover the cost of the original loan.
If you’re weighing a payday loan versus a personal loan, it’s best to avoid the former. But, if you’re struggling to qualify for a personal loan, there are still ways to get around your credit history. For instance, consider applying with a cosigner or offering up collateral to access a secured loan.