The best places to get a personal loan: banks credit unions and online lenders compared
Quick Answer
No single place is best: credit unions often price personal loans lower for members, banks reward existing customers, and online lenders offer speed and range. Compare prequalified offers from at least one of each type.
Credit unions require membership and online lenders vary in fees, so compare APRs. Never pay a fee before receiving the loan.
Your credit score determines which lenders will approve you
A credit score is a numerical rating of your reliability in repaying debts. Lenders use this number to decide if they will give you a loan and what rate they will charge. A higher score typically gives you access to the best places to get a personal loan.
At a glance
- Credit unions
- Often lower rates; membership required
- Banks
- May reward existing customers
- Online lenders
- Fast funding; wide range of rates
- Peer-to-peer
- Investors fund the loan through a platform
Comparing banks, credit unions and online lenders for a personal loan
The best place for a personal loan depends on your specific goals and credit history. Credit unions often offer lower interest rates for members. Banks provide convenient services for existing customers with established relationships. You can weigh different lending options to find the fastest approval times and a wider range of options for various credit profiles.
Compare prequalified offers from at least one of each type to see which provider offers the best terms for your situation. The following table ranks these options by the typical speed of the funding process.
Debt consolidation loan comparison
| Loan Provider Type | Typical Approval Speed | Primary Membership Requirement |
|---|---|---|
| Online lender | Fastest funding turnaround | No membership required |
| Bank | Standard processing time | Existing customer status |
| Credit union | Slower manual review | Active member status |
Do I need to join a credit union first?
You must join a credit union to access their personal loans. A credit union is a member-owned financial cooperative that provides banking services to its members. Most credit unions require you to meet specific criteria, such as living in a certain area or working in a particular industry, to become a member before you can apply for a loan.
Which place suits a borrower with fair credit?
A credit union or an online lender suits a borrower with fair credit because these entities often evaluate more than a single credit score. While a bank might maintain strict score requirements, a long-standing relationship with a local bank can sometimes help a borrower qualify for a loan.
Automated risk systems and debt ratios
Online lenders frequently use automated systems to calculate risk, which helps them find the best place to get a personal loan for those with non-prime scores. Credit unions often provide personalized service and may consider a borrower’s history of consistent payments. These institutions often look at the debt-to-income ratio to determine if a borrower can manage the monthly cost.
Comparing lenders without affecting my credit score
Borrowers can compare different personal loan places by requesting pre-qualified offers. These preliminary checks allow a borrower to see potential terms without triggering a hard inquiry on their credit report. A hard inquiry is a formal check of your credit report performed by a lender when you apply for a loan. To find the best terms, you can see how personal loan interest rates are set before you commit to a formal application.
Fastest places to receive your funds
Fastest places to receive your funds
Online lenders typically fund a loan the fastest, sometimes completing the transfer within a business day or two. Banks and credit unions often require more time to process the request. You should request a specific funding timeline from every lender to confirm how quickly they move money.
Digital workflows versus manual verification
Speed varies based on the institution type. Online lenders prioritize digital workflows to close a deal quickly, while traditional personal loan places may involve manual verification steps. These differences impact the time between your approval and when the cash hits your account.
Balancing funding speed with loan terms
Identifying the best places for personal loans involves weighing speed against other terms. While an online lender might transfer funds rapidly, a credit union might offer different terms. Each lender maintains its own internal schedule for moving capital to borrowers.
How do loan rates and fees differ by lender?
Loan rates and fees vary because credit unions often charge lower APRs and fees, while banks charge moderate rates with variable fees. Online lenders range widely in their costs. Borrowers must compare the APR and the written fee schedule from each lender to determine the total cost of borrowing.
Lender fee and rate structures
- Credit unions often charge lower APRs and fees than traditional banks.
- Banks charge moderate rates with fees that vary depending on the specific loan product.
- Online lenders range widely in the interest rates they accept for borrowers.
- Borrowers must compare the APR and the written fee schedule from each lender.
- An origination fee is a charge lenders take from the loan amount to cover processing costs.
The interest rate determines your total cost of borrowing
An interest rate is the cost you pay to borrow money expressed as a percentage. It is calculated based on your creditworthiness and the lender's specific policies. Choosing a lender with a lower rate will save you money over the life of your loan.
Comparing loan costs by lender type
Credit unions typically offer lower costs for members, which can save borrowers money on interest. Banks provide a middle ground with standard rates and various fee structures. Online lenders provide a broad spectrum of options, so you can see how loans affect your credit while comparing high and competitive pricing.
Understanding the peer-to-peer lending model
Peer-to-peer lending is a method where an online platform connects borrowers directly with individual investors. The platform sets the interest rate and collects a fee for the service. This model functions like an online lender, but the capital originates from private individuals rather than a bank or a credit union.
Matching borrowers with individual investors
Peer-to-peer lending offers a way to find a personal loan where the funding source is decentralized. Peer-to-peer lending is a method of matching individual borrowers directly with individual investors through an online platform. While this model can lower the cost of capital for some borrowers, the platform’s specific fees and the investor’s risk appetite dictate the final terms. Borrowers should check the platform’s specific fee structure to see how it compares to traditional bank costs.
Ways to get a loan from individual investors
Borrowers request funds through a digital marketplace where private investors review the application. The platform manages the transfer of capital and the collection of payments. This system allows investors to earn interest while borrowers access capital without a traditional bank intermediary.
Which lender type fits which borrower
- Borrowers with fair credit
- If your credit score is neither strong nor poor, you should compare credit unions and some online lenders, as they may offer better terms.
- Borrowers who need cash fast
- Online lenders may fund you quickly, but you should weigh that speed against the APR and fees.
- Customers of a local bank
- Because you have a long relationship with a local bank branch, ask them for a relationship rate before you look elsewhere.
Mistakes when choosing a lender
- Do not pick the first lender that approves you. Approval is not the same as a fair price.
- Avoid paying an upfront fee to get a loan. Real lenders take fees from the loan or the payments, so upfront fee requests are a scam warning.
How to choose the best personal loan for your needs
Selecting a lender requires a clear comparison of terms and costs once you have determined your required loan amount and purpose.
Loan selection process
- Compare at least one bank, one credit union and one online lender. Identify three distinct types of institutions to evaluate. This ensures you see a variety of lending models and structures.
- Prequalify with soft inquiries. Submit your information to lenders who offer soft credit pulls.
- Check each lender's license and reviews. Verify that each company is legally licensed to provide loans. Read customer feedback to see if others had positive experiences.
- Compare APR, fees and funding time. Compare the interest rates, total costs, and how fast you receive funds. Note that the Federal Reserve G.19 consumer credit release reports an average rate of 11.90 percent on 24-month personal loans at commercial banks.
- Never pay a fee before receiving money. Confirm that no upfront costs are required. If a lender asks for money before the loan is deposited, do not proceed.
Frequently asked questions
- Which lender is easiest personal loan get approved by?
- Approval odds depend on the lender and your profile; credit unions and online lenders may approve a wider range of scores than some banks, so compare prequalified offers.
- Are online lenders safe?
- Check that an online lender is licensed in your state and read its reviews; reputable lenders disclose the APR and never ask for a fee before the loan is funded.
- Do I need an account to get a loan from a bank?
- Banks provide convenient services for existing customers with established relationships. While a long-standing relationship can help you qualify, you should compare prequalified offers from multiple types of institutions.