Where to get a personal loan
Although there are many types of lenders ready for you Personal loan, there is no better option. Depending on where you prefer to manage your money and the loan terms, fees, and interest rates, you can find a great personal loan from a credit union, bank, or lender in line.
Before applying for a personal loan, research the best deals for each type of lender.
The best places to get a personal loan:
- Online lenders: These digital lenders allow you to search and compare offers, apply for the loan, and receive the funds entirely online. It is a quick and convenient approach to obtaining a personal loan if you are comfortable with the online approach.
- Banks: These lenders usually have physical local branches that you can visit if you need assistance with the loan application or during the life of the loan. You can turn to local banks or some of the major financial institutions such as Citigroup and Wells Fargo.
- Credit unions: You usually need to be a member to apply for a loan from these member-owned financial institutions, but personal loans from credit unions may have lower interest rates and more flexible terms than loans from other lenders.
Where to get a personal loan
These financial institutions streamline the borrowing process, allowing you to compare rates and terms of personal loans, apply online and receive a response usually within the same day.
One feature that sets online lenders apart is that most use a prequalification to treat. Online lenders can provide you with personalized rates and terms after running a “soft” credit check, which will have no impact on your credit. However, the lender will perform a “hard” credit check when you finalize the loan, which usually temporarily lowers your credit rating by a few points.
Many online lenders are also willing to work with people with lower credit scores. In addition to looking at your credit history and income, they will take other factors, such as your job and education, into account when making a loan decision.
There are many online lender options to choose from. For example, you may decide to work with a peer lender in line. These loans are financed by investors instead of a traditional bank.
- Advantages: The fees may be lower. Online lenders don’t have the expense of operating a physical location, so they can pass the savings on to account holders.
- Disadvantages: Interest rates may be higher. Emission unsecured personal loans is risky, so online lenders may charge higher interest rates than traditional financial institutions.
- Best for: Tech-savvy borrowers who are comfortable applying for a loan without an online banker.
Although online lenders now play a larger role in personal loans, banks still lend tens of billions of dollars a year. Banks usually offer higher loan amounts, but require borrowers to have a higher credit rating. In fact, 79 percent of banks’ unsecured personal loan funds go to borrowers who have a credit score of at least 661, according to TransUnion.
If you already have a relationship with a bank, some offer relationship discounts. For example, some banks reduce the APR on your personal loan by 0.25% if you already have an eligible account with the bank. This can help you save money over the life of the loan. If you love your bank or are a long-time customer, ask about this type of discount.
Even if you have been dealing with an institution for many years, they will still check your credit. The bank will perform a credit check and review your personal information before making their loan decision.
- Advantages: Loan amounts are generally higher from traditional banks. This can be useful if you need to borrow a large amount of money.
- Disadvantages: Traditional banks generally require a strong credit score for approval and may have more stringent underwriting requirements.
- Best for: Borrowers with good credit.
Instead of responding to shareholders, credit unions are required to act in the best interests of their members, who are customers like you. Credit unions require membership to qualify for a personal loan, but this can be an easy barrier to overcome. For example, some credit unions simply require that you make a small donation to a charity or live in a certain area.
Borrowers with average credit may have more success getting a personal loan from a credit union. About 38% of unsecured personal loan funds from credit unions went to borrowers with a credit score of 660 or less, compared to 21% for banks, according to data from TransUnion.
Since credit unions are not-for-profit institutions, their mission can influence their lending decisions. For example, the Navy Federal Credit Union, which serves members of the United States Armed Forces and the National Guard, may offer loans to borrowers who would not be approved elsewhere.
Credit unions tend to offer smaller personal loans than banks and online lenders, and their interest rates may be lower. The average interest rate on a three-year personal loan from a credit union is 9.09%, compared to 10.24% at a bank, according to December 2020 data from the National Credit Union Administration.
- Advantages: Credit unions generally have lower credit score requirements.
- Disadvantages: Loan amounts are lower than those of banks, due to the increased credit risk that credit unions absorb.
- Best for: Credit union members who have average credit and do not need a large loan
How to choose the best lender for you
The amount of money you need to borrow, the terms you look for, and your financial history all go into determining the best personal loan for you.
Here are the steps you can take to determine the type of lender that’s right for you:
- Research the rates, fees, terms and amounts of personal loans from several types of financial institutions.
- Check the eligibility conditions for each loan.
- Find out if you are eligible to become a member of a local credit union.
- Check your credit reports and credit scores.
- Calculate how much you need to borrow.
- Calculate monthly payments you can afford.
Once you’ve found the personal loan that meets your needs, research the reputation of that particular lender. Look through online review, the Better Business Bureau and the Consumer Financial Protection Bureau.
If you have a relationship with a financial institution that you enjoy working with, it makes sense to see if they can offer you a competitive personal loan deal. When looking for a personal lender, compare interest rates and fees and weigh customer service reviews to make sure you get the support you expect.
Before making a decision, use a personal loan calculator to see how much your monthly payments will be and how much the loan will cost you overall.