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Where to get a personal loan
Compare 5 main types of lenders to find the best place to get your loan.
5 best places to get a personal loan
- 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
- Connection services: Best for comparing your options when you don’t know where to start
Personal loans from online lenders
- Get your money as fast as one business day with minimal documents required
- Higher rates than banks and credit unions
Online lenders are generally the easiest type of lender to borrow from. You can often check your rates by filling out a quick online form, usually without affecting your credit score. If you like your offer, all you typically need to do is upload your most recent bank statements and pay stubs to verify your income. You can often get your funds as soon as the next business day.
These types of lenders are fast because they use algorithms rather than people to review your application. And they’re open to more credit types because they often consider factors beyond credit and income when you apply, like your level of education and length of employment. But they tend to have higher rates than banks and credit unions.
Personal loans from banks
- Borrow from a lender you trust and qualify for larger amounts
- Longer application with fewer options for borrowers with average credit
Banks might be 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 most 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 like Discover have partnered with tech companies to speed up applications, many still rely on staff to underwrite loans — sometimes 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.
Local banks vs. big banks
If you want to borrow from a bank, think local. Large banks like Chase have started moving away from personal loans altogether — they’re just not that profitable. But you can usually find options at regional or even neighborhood banks.
Have bad credit? Check out local banks that qualify as a community financial development institution (CDFI). These aim to boost the economy in the local community and offer affordable financing options to all credit types.
Personal loans from credit unions
- Lower rates and friendly to most credit types
- Long application that requires you to become a member
Credit unions are nonprofit financial institutions owned by their members. They have lower overhead costs than banks, so they can often offer lower rates and fees compared to other lenders — especially if you have average credit.
The main drawback is that you have to become a member to apply, which usually involves opening a checking or savings account with a $5 balance. Some allow you to become a member during the application process, while others require you to apply for membership beforehand. And credit unions usually serve specific geographic locations, professions or employees of a company — so membership isn’t open to everyone.
Personal loans from peer-to-peer lenders
- Streamlined application with loans funded by individuals
- Can take longer than an online lender to receive funds
Peer-to-peer lending allows you to borrow from individuals 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. For example, it can take up to seven days to get a loan from popular peer-to-peer lender LendingClub.
Personal loans through connection services
- Prequalify for offers from multiple lenders
- Limited to connection service’s network of partners
A connection service 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.
Connection services are generally 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. And many users complain about getting calls from lenders well after they’ve taken out a loan.
Compare personal loan providers
3 tips to find the best lender for your needs
Not sure which type of lender you should go with? Ask yourself a few questions to help you decide:
- Nail down 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 connection service 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 or when you sign up for a budgeting app like Mint. 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.
Finding the right type of lender is the first step to getting the best deal on a personal loan. 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.
You can learn more about how borrowing works by checking out our guide to personal loans.
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