Deciding where to get a loan can make or break a loan application. Which one is best for you depends on your personal situation and your priorities. If you want funding fast, an online lender might be the way to go. But if you prefer working with a lender that you already have a relationship with, a bank or credit union might be a better choice. Keep reading to find out where is the best place to get a loan.
Where’s the best place to get a loan?
The best place to get a personal loan depends on your needs and priorities. Below are 5 options to consider when deciding where to get a loan. Keep reading to see which one is right for you.
- Online lenders: Best for fast, streamlined funding for all credit types
- Banks: Best for borrowing large amounts with excellent credit
- Credit unions: Best for low rates and flexible terms
- Peer-to-peer lenders: Best for investor-backed funding
- Broker services: Best for comparing your options when you don’t know where to start
Personal loans from online lenders
With online lenders, you fill out a simple online application to get pre-approval, usually within minutes. During the pre-approval stage, you find out what rates you may be eligible for based on the lender’s quick scan of your finances using technology, and if you like the offer, you can proceed to approval, where the lender does a more thorough review of your finances.
If everything checks out and there are no surprises to your financial situation, the lender gives official approval. You sign the contract and receive your funds within 24 hours.
Pros
- They have more flexible lending criteria than banks, so it’s easier to get a loan.
- Online lenders may be the best place to get a loan with bad credit or no credit.
- Check your rates by filling out an easy form online, usually without affecting your credit score.
- Get funding fast. The turnaround time is around 1 to 3 business days, from filling out the application to funding.
What to watch out for
- Borrowers with bad credit tend to face higher interest rates.
- Loan amounts usually max out at $50,000.
Compare online lenders
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Personal loans from banks
Banks are a good choice if you’d prefer to keep all of your finances in one place or need to borrow more than $50,000 — where many online lenders max out. Some even offer loyalty discounts, so you could get lower rates if you’re already a customer.
But they can take a long time. While some banks use various technologies to speed up applications, many still rely on staff to underwrite loans. It can take weeks to process an application. And banks are generally risk-averse, so you might have a hard time qualifying without excellent credit.
Pros
- Banks are a solid choice if you have good to excellent credit.
- They offer competitive interest rates.
- Loan amounts can be relatively high at $100,000 or more.
What to watch out for
- If you have bad credit, banks may not approve you.
- Turnaround time can be a few weeks.
- The application process is more involved and requires more documents for you to provide.
Personal loans from credit unions
Credit unions are nonprofit financial institutions owned by their members. They have lower overhead costs than banks, so they can often offer lower personal loan interest rates and fees compared to other lenders — especially if you have average credit.
However, you may be required to become a member to apply by opening an account with a minimum balance or after purchasing a certain number of shares in the credit union. Some allow you to become a member during the application process, while others require you to apply for membership beforehand.
Pros
- If you have good to excellent credit, credit unions will want your business.
- Just like banks, they can offer competitive interest rates.
What to watch out for
- Borrowers with bad credit are likely not eligible.
- Turnaround can take a few weeks.
- A membership may be required to get a personal loan.
Personal loans from credit unions
Personal loans from peer-to-peer lenders
Peer-to-peer lending allows you to borrow from everyday Canadians rather than a financial institution, giving the potential for lower rates. These work a lot like personal loans from online lenders in most cases — both use similar technology to evaluate applications. But since these loans are backed by individuals, it can take a little longer to get your funds.
Pros
- You may be able to get a lower rate compared to other types of personal loans, even those from banks and credit unions.
- The application process is quick and easy.
Cons
- A decent credit score is required (above 600).
- Turnaround can take around 1 to 2 weeks because finding investors to fund your personal loan takes time.
Apply for a personal loan with a peer-to-peer lender
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Personal loans through broker services
A broker service such as Loans Canada and LoanConnect allows you to prequalify and compare personalized offers from multiple lenders by filling out one online form. Most work with online and peer-to-peer lenders, though it’s possible to also get connected with banks and credit unions. These can be helpful if you’re new to personal loans or have difficulty qualifying with most lenders.
Brokers are free to use since they make money from the lenders in their network. But this can be a double-edged sword since you’re limited to comparing offers from the lenders they partner with. It can also be difficult to tell where your information is going when you fill out the online form.
Pros
- Prequalify for offers from multiple lenders by filling out 1 quick application.
- Compare rates and terms from multiple lenders.
- Borrowers with bad credit can find lenders who will likely approve them.
Cons
- You will only find lenders that the broker is partnered with.
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4 tips to help you find the best place to get a loan
With all of the different options for where to get a loan in Canada, it can be tough to decide which one is the best option for you based on your needs and financial situation. Following the steps below can help you narrow down your choices and decide which is the best place for you.
- Decide on your priorities. Do you want lower rates or higher loan amounts? Consider applying with a bank or credit union. Would you pay a little more for faster funds or a less-involved application? An online or peer-to-peer lender might be the way to go. If you’re not sure what your priorities are, a broker could be a good place to start.
- Check your credit score. If you don’t know it, you can get your credit score online for free. Bigger banks tend to have stricter credit requirements. If you have a credit score below 700, you might have an easier time qualifying with an online lender or credit union.
- See if your bank or credit union offers discounts. If you already have a relationship with a bank that offers personal loans, it might be worth looking into loyalty discounts. Your bank might also be able to process your application faster since it already has information about your finances.
- Compare your options. If you want to compare offers from different lenders, you could use the services of a broker. Loans Canada and LoanConnect both have a large network of lenders. You can read our full guide to personal loan brokers to learn more.
Bottom line
Finding the best place to get a loan becomes easier when you know how different types of lenders work. Online lenders are faster and less involved, but banks and credit unions might offer loyalty discounts and allow you to keep your finances all in one place. Peer-to-peer lenders may be able to offer lower rates, but funding can take a while and you need a good credit score to qualify.
You can learn more about how borrowing works by checking out our comprehensive guide to personal loans here.
Frequently asked questions about the best place to get a loan
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