Choosing the Best Place to Get a Personal Loan for Your Needs
When you need cash and are considering a personal loan, you have options, from banks to credit unions to online lenders. But the thought of sifting through dozens of personal loan companies and choosing where to get your loan may seem daunting. The best place to get a loan will depend on your needs.
Finding the best place to get a loan for you
When you need a personal loan, there are three primary ways to find one: banks, credit unions and online lenders.
Banks are for-profit financial institutions that offer personal loans and other products, and they may be the first place that comes to mind. Many national banks have numerous branches where you can get in-person support. But banks tend to have stricter qualification requirements, so the best bank loans may be hard to get. Some national banks, including Bank of America and Chase, don’t offer personal loans.
Credit unions are nonprofit organizations owned by their members. They generally can offer lower interest rates on personal loans. Credit unions may lack apps that provide a user-friendly digital experience. You’ll need to join a specific credit union to get a personal loan. Membership may be based on family, employer, location or other factors.
Online lenders are for-profit businesses that generally offer completely digital experiences. You can shop for online loans, seek prequalification, submit an application and receive the funds through a streamlined process. Because lenders don’t have to maintain branches, they may be able to offer lower interest rates compared to banks and credit unions. The trade-off is that there’s likely no in-person customer service.
|APR||Loan amount||Repayment term||Origination fee|
|Santander Bank, N.A||6.99%–24.99%||$5,000–$50,000||36 to 84 months||No origination fee|
|U.S. Bank||8.99%–21.49%||$1,000–$50,000||12 to 84 months||No origination fees|
|Wells Fargo Bank||7.49%–23.24%||$3,000–$100,000||12 to 84 months||None|
If a customer already has a checking or savings account with a bank, it may be their go-to option when selecting a personal loan lender. However, there are several key differences between banks and the other types of lenders we’re discussing, including:
- Customer service: You can apply for a personal loan in person if you need help or prefer not to bank online. You don’t have this option with an online lender. Banks tend to be less favorable compared to credit unions, which also offer in-person help.
- Mobile apps: Banks may offer more mobile capabilities, including apps, than credit unions and even online lenders.
- Size: Banks and credit unions have similar branch totals in the U.S., but national bank branches are more spread out across the U.S.
- Lending policies and guidelines: Banks generally have stricter lending policies and guidelines that can make it tough for applicants to get approved for a personal loan.
Anyone can apply for a personal loan with a bank, but each institution sets its own requirements to qualify. For example, a bank may pull an applicant’s credit, check their income and verify their employment status to ensure the borrower can repay their personal loan.
Bank loan applicants with lower credit scores or inconsistent monthly income aren’t generally considered ideal candidates. If approved, they could be offered a higher interest rate for a loan amount lower than what they requested and/or asked to provide collateral.
|APR||Loan amount||Repayment term||Origination fee|
|PenFed Credit Union||Starting at 7.74%||Up to $50,000||Up to 60 months||None|
|Wright-Patt Credit Union||Starting at 7.99%||$500–$40,000||Up to 60 months||No origination fee|
|Affinity Federal Credit Union||Starting at 9.75%||Check with credit union||Up to 120 months||No origination fee|
Credit unions operate as nonprofits that members own. These members join by meeting certain criteria, from geographic location to membership in a group. Similar to banks, credit unions offer an array of financial products and services. But the two lenders have distinct differences:
- Membership: To access credit union personal loans, consumers must become members. You may be required to be in a particular organization, work in a certain field or pay a nominal fee between $5 and $25.
- Shared branches: Services such as the CO-OP Shared Branch network may allow you to pay your personal loan at partner credit unions across the country.
- Community-oriented: Many credit unions tend to be more involved in their communities. For example, Illinois-based Alliant Credit Union offers financial literacy classes and education assistance in the Chicago area.
Because credit unions generally pass their savings to members, choosing a credit union could mean approval for a personal loan with a reasonable interest rate. Credit union APRs for personal loans above $1,000 are capped at 18%. The approval decision will typically be based on your credit score and debt-to-income (DTI) ratio, though many credit unions have lower minimum credit score requirements for personal loans than banks.
|APR||Loan amount||Repayment term||Origination fee|
|LightStream||5.99%–23.99% *with autopay||$5,000–$100,000||24 to 144 months||No origination fee|
|Rocket Loans||9.12%–29.99%||$2,000–$45,000||36 or 60 months||1.00% - 6.00%|
|Upgrade||8.49%–35.97%||$1,000–$50,000||24 to 84 months||1.85% - 8.99%|
Online lenders, simply, provide money to borrowers online for a variety of reasons, from debt consolidation to medical expenses to home repairs. These lenders can also have more specialized offerings, such as bad-credit loans, than banks and credit unions. Differences between online lenders and the other types of lenders include:
- Strictly online: Most online lenders operate exclusively online, so there aren’t storefronts or branches like with banks and credit unions.
- Products and services: Some online lenders only provide personal loans, so traditional products and services offered by banks and credit unions may not be available.
- Lending policies: Borrowers with less-than-perfect credit have a chance at approval depending on the lender.
Online lenders will review similar factors as banks and credit unions do for their applicants. Although the same information is factored, some online lenders will look beyond an applicant’s credit score when making a decision. For example, LendingClub– an online lender that offers peer-to-peer loans – predicts your likelihood to make on-time payments. This can be beneficial to borrowers with poor credit who would likely be denied by other lenders.
Beware payday and title loan lenders
Predatory lenders generally impose unfair or abusive practices on borrowers, or try to force expensive loans on applicants. When possible, steer clear of these types of lenders:
- Payday lenders market payday loans as an accessible way to bridge the gap between paychecks. You borrow a lump sum and promise to pay it back, along with fees, on your next payday. If you can’t pay it back on time, the lender may extend the loan term, trapping you in a cycle of debt.
- Title loan lenders provide small, short-term loans in exchange for the title to your vehicle. To get the title back, you usually must pay the money within 30 days, along with fees. If you fail to repay the money, the lender can take your vehicle.
It’s not always obvious that a loan or lender is predatory. Here are some common red flags:
- High APR and fees: Payday lenders, for example, often charge triple-digit APRs, while many online personal loan lenders cap APRs at 36%. That’s not to say you should rush to get a personal loan with an APR of 36%, but there’s a clear delineation.
- Short repayment terms: Payday loan terms are often about two weeks, while personal loans generally have repayment terms of at least 12 months.
- Lack of transparency: Predatory websites won’t generally provide the information you need to make an informed decision, such as APRs, terms and amounts. If you can’t find the answers you need and you can afford the time to move on, do so.
- Easy approval process: A personal loan lender should check your ability to repay, which may include a credit and employment check. There are plenty of payday and title loan lenders that offer no-credit-check options, which can be problematic.
- Pressure to take out a loan: You should never feel pressure from a lender to borrow money, whether it’s a payday or personal loan lender.
Deciding which type of lender has the best loan for you
After checking out the three primary ways you can find a personal loan, it’s time to choose one that best fits your needs. The best personal loan companies generally offer low interest rates, realistic repayment terms and good customer support, but a bank, credit union and online lender offer different experiences.
For example, think about whether you prefer in-person customer service. You’ll only get that through a bank or credit union. If you already have a checking or savings account with a bank or credit union, you may have a better chance of getting approved or qualifying for a relationship discount, as well. Meanwhile, an online lender could be more affordable and offer a faster application process. Consider the following:
- Banks: This type of lender is ideal if you have an existing relationship at a bank and you prefer working with a representative in person.
- Credit unions: This type of lender may be a good fit for you if you qualify to join a credit union and prefer having the option of in-person support.
- Online lenders: This type of lender can be good for borrowers who don’t mind the online-only experience or those who can’t find a low-APR loan elsewhere.
Comparing lenders to find the right loan
When shopping around for a personal loan, first seek out lenders that offer prequalification. Prequalification allows you to see if you’d be approved for a personal loan without a hard inquiry on your credit report.
Prequalification is common with online lenders (SoFi Bank and Avant are examples), though it’s not as common with credit unions and banks. Beyond prequalification, there are a number of factors to consider when comparing lenders:
- APR: The APR (interest rate plus fees) will affect how much your loan will cost. Because some lenders offer lower APRs than others, reviewing the APR will be important.
- Repayment terms: While most lenders allow you to choose a desired loan term, some lenders will adjust what’s offered to you. If you don’t feel you’ll have enough time to repay the loan, it can lead to additional financial struggles.
- Fees: Origination fees, prepayment fees and late penalties can increase the cost of your loan. Look for lenders that don’t charge fees. If you select one that does, make sure you know the specifics.
- Credit score: Lenders tend to approve personal loans for those who are creditworthy. What a lender considers creditworthy will vary, but your credit score can limit you. Visit the lender’s website or contact customer service to inquire about their minimum credit requirement.
- Loan amount: Knowing how much you need will be key in determining which lender is an ideal fit for your needs. For example, PenFed Credit Union offers personal loans up to $50,000. If you need more than $35,000, PenFed Credit Union wouldn’t be the lender for you.
- Approval process: If you need the loan as soon as possible, consider a lender that lets you apply online and can fund your loan quickly.
Formally applying for a personal loan
Here’s a general breakdown of how the application process for a personal loan works:
- Know what to expect: Depending on the lender, the application process may take a few days, though some timelines stretch to two weeks from application to funding.
- Gather your documents: You may need to provide recent pay stubs, W-2 forms, tax returns, a copy of your driver’s license or Social Security card and utility bills to verify your address.
- Fill out and submit the application. If you don’t understand something while filling out the application, contact the lender and ask for clarification. Making mistakes on the application can affect your loan eligibility, but asking questions can help you avoid this. When you formally submit an application, a hard credit inquiry will be performed, which can impact your credit score by a few points.
- Sit tight: Once approved, the timeline to funding will depend on the lender. In some cases, borrowers could receive same-day funding, though it generally takes longer. If you don’t get the money when expected, reach out to the lender.
Personal loan FAQs
Still have questions about the best places to get a loan for you? These questions and answers might help:
How do you get a personal loan from a bank?
Before applying for a personal loan from a bank, check your credit so you understand your chances of qualifying for loan. You can find your VantageScore 3 credit score for free with a service like MyLendingTree.
Some credit card companies will also show you your FICO Score if you’re a customer. You can also order a free copy of your credit report from AnnualCreditReport.com. Note that this report will reveal your credit history but does not contain a credit score.
Once you’ve reviewed your credit, you can start the application process. Most banks let you apply for a personal loan online or in-person. LendingTree’s free prequalification tool lets you explore offers from multiple lenders at once with no impact on your credit.
If you find a loan you like, you can submit a full application. You’ll provide your personal information and might have to upload supporting documentation, such as pay stubs. You should hear back from the bank quickly about a decision on a personal loan. Some banks even offer same-day funding, while others might take a few days to process your application and deposit the funds into your account.
How do personal loans work?
Personal loans are installment loans, or sums of money that you’ll borrow from a lender and pay off over a set period of time. Loans with the lowest rates are typically unsecured, meaning you don’t need to put up collateral to borrow one. To get one of these loans, you typically need to have a strong credit score. Secured personal loans require collateral. These loans can come with high, even predatory interest rates. What’s more, you run the risk of losing your collateral if you can’t afford to pay them back.
Repayment terms on personal loans typically span 12 and 84 months, and you’ll likely choose your repayment term at the time you borrow. Some personal loans come with an origination fee, which may be taken out of the amount you request.
These loans can be used for a variety of purposes, including debt consolidation, a major purchase, home renovations, moving costs, a vacation, a wedding or another personal expense. Rates and terms can vary from lender to lender, so make sure to shop around to find the best deal for you.
By prioritizing the lowest APR, you can find a personal loan with the lowest long-term costs of borrowing. Making on-time payments on your loan every month can also help build your credit.
How hard is it to get a personal loan?
The application process for a personal loan is typically straightforward and easy, and you might get funding the same day you apply. But while applying for a personal loan is usually easy, qualifying for one may not be.
Most unsecured personal loans require good credit, which usually translates to a score of 670 or higher. The lowest rates are reserved for borrowers with excellent credit scores of 700 or above.
If you have weak credit, it can be hard to get a personal loan, at least one with an affordable interest rate and reasonable terms.
What’s the best use for a personal loan?
Personal loans come with interest charges, so you don’t want to borrow one unless it’s essential. If you have an important expense to cover, such as medical bills, it may make sense to do so with a personal loan.
Borrowing a personal loan might also be worth it for investment that could make you money in the future, such as home renovations that will increase the value of your home. Some borrowers also benefit from using a personal loan for debt consolidation, particularly if it reduces the interest charges on your debts.
If you’re considering borrowing a loan to cover a personal expense, such as a wedding or vacation, you’ll need to decide if the expense is worth it. After all, you’ll end up paying back more than the amount you borrow over the years due to interest charges. If you can save money to cover these expenses, doing so might be a better financial decision in the long run than taking on debt.
Can I get a personal loan with no bank account?
Getting a personal loan without a bank account would be difficult. Lenders look at your bank account to ensure that you have the cash flow to pay back your loan on time and in full. You might be able to find a payday lender that will lend to you without a bank account, but it may charge you predatory fees and interest rates. It’s also possible to open a secured credit card without a bank account, but these also will come with high interest charges if you fail to make payments.