There are many personal loans at your disposal, but they’re not all created equal. That’s why it’s important to do your research and compare options from multiple lenders.
Here’s a closer look at where to get a personal loan.
Where to get a personal loan
Each lender has its own requirements. To find the best deal for your unique situation, you’ll need to shop around and read the fine print. Keep in mind that the higher your credit score, the better your chances of getting approved for a loan with lower interest rates.
Online lenders
Many online lenders offer personal loans with low interest rates and a variety of repayment terms. Certain lenders allow cosigners, so if your credit score is on the lower end you may be able to boost your approval chances by applying with one. Some also provide other perks, like no origination fees or free credit-score monitoring.
Compared to banks and credit unions, online lenders are often much faster. This is great news if you’re looking for an easy application process and fast access to funds.
Pros
- Easy application process: In general, online lenders provide a quick and easy application process. You may even get approved in minutes.
- Fast funding: If you’re approved for a loan from an online lender, you can typically expect your funds fairly quickly. The lender will usually either distribute them the same day, within 24 hours, or in 5 business days.
- Lower rates and fees: Since online lenders don’t have as many overhead expenses as brick-and-mortar lenders, you can enjoy lower interest rates and fees that reduce your overall cost of borrowing.
Cons
- Fewer options for bad credit: Most online lenders prefer borrowers with good to excellent credit. If you don’t have the best credit, you might have an easier time getting approved for a loan with your current bank or credit union.
- No branch locations: Online-only lenders don’t have physical locations. This can be an issue if you prefer in-person service.
- Risk of scams: If you apply for a loan online, you might put yourself at risk for a scam. That’s why it’s crucial to only work with reputable lenders.
Banks
Not all banks offer personal loans. But if you’re a customer at a traditional bank, it’s a good idea to ask if they do. As a customer with a current account, you might qualify for a personal loan and could even score a discount.
Even though you may lock in a good rate if you have great credit, you might find a better rate or term at a different financial institution. What’s more, banks often require a longer application process with more paperwork. It may take weeks or even months to get approved and receive your funds.
Pros
- Loyalty discounts: Many banks offer discounts on rates to borrowers who already have an account with them. A lower interest rate can save you money on your loan.
- Physical locations: If you prefer in-person service, taking out a personal loan with a bank that has brick-and-mortar branches may be a good choice.
Cons
- Personal loans not always available: While some banks offer personal loans, some don’t. You’ll need to shop around to find banks offering personal loans.
- May need to be a customer: Depending on the bank you choose, you might need to have a current account to apply for a loan. Many banks prefer to lend to customers.
- May have higher rates and fees: Since physical banks have higher overhead costs than online lenders, their loans tend to come with higher rates and fees. This can significantly increase the overall cost of your loan.
Credit unions
Credit unions are another place to consider for a personal loan. These not-for-profit organizations can offer lower rates and fees on personal loans than other lenders. In addition, you may be able to get approved even if you have bad credit.
The caveat is that you must become a credit union member before you can take out a loan. While membership requirements vary, you usually have to be part of a specific community, profession, or organization. Be sure to check out your local credit union loan offers before you sign up.
Pros
- Lower rates and fees: Since credit unions are nonprofit organizations, they often come with lower rates and fees compared to other lenders.
- Easier to qualify: Credit unions sometimes have less stringent eligibility requirements, so you may get approved for a personal loan with bad credit.
Cons
- Must be a member: You’ll have to join the credit union to take out a loan. Most credit unions require you to live in a specific area, work in a certain field, or join an affiliated association.
- Smaller loan amounts: Personal loans at credit unions tend to be smaller than borrowing amounts with online lenders or banks. Most of them cap out at $50,000.
How to choose the right loan
As you shop around for personal loans, consider the following:
- Eligibility requirements: Some lenders look for good to excellent credit. Others are more flexible and willing to lend to those with fair or poor credit. Make sure you meet the credit score and income requirements of a lender before you apply for a loan with them.
- Interest rate: Typically, your credit score will determine the interest rate you receive. The lowest rates are reserved for borrowers with good to -excellent credit. If you have less-than-perfect credit, you’ll likely have to settle for a higher rate.
- Fees: While some lenders charge many fees, others keep their fees to a minimum. The most common types of fees include origination fees, application fees, late fees, and insufficient fund fees. Keep in mind that these fees are often charged in addition to interest.
- Customer experience: Ideally, you’d choose a highly rated lender with excellent reviews from current and former customers. The lender should also be available to assist you in person or via phone, email, or chat.
- Perks: Some lenders go above and beyond and offer several customer perks. A few examples include free credit score checks and hardship assistance.
If you think you won’t qualify for the rates you want based on your credit, consider enlisting a cosigner to help you out. However, your cosigner will be on the hook for your debt if you default on the loan.