A personal loan is a type of unsecured loan that can be used to pay for just about any expense — whether it’s an unexpected medical bill or car repair or the cost of moving or home renovations, among many other uses.
Given the flexibility in ways to spend your personal loan, it’s no surprise that personal loans are a popular choice. A recent report by the credit bureau Experian found that there were 42.7 million personal loan accounts open at the end of the third quarter of 2020.
So where, exactly, are all those personal loans coming from? And what types of lenders can you choose from if you’re in the market?
Where Can You Get a Personal Loan?
Personal loans are generally available through three main markets: banks, credit unions, and online lenders. (There are also other types of personal loans available through physical storefronts and online, such as payday loans and pawnshop loans, but it’s usually worth avoiding these sorts of loans for reasons we’ll discuss in a minute.)
Both national and regional banks often offer personal loans, which you may be able to apply for online or in person. A bank may be the first choice for consumers who are already account holders at that institution, especially since the loan amount can be automatic — and likely quickly — deposited directly into their checking account.
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Credit unions are another popular option for personal loan seekers — though generally, these loans are only available to those who are already credit union members.
Each credit union has its own eligibility requirements to open an account or otherwise do business with it, which may be based on where you live or what industry you work in. However, if you do have access to a credit union, you may find some of the lower interest rates and more favorable terms available there than at other financial institutions.
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Perhaps one of the easiest places to get a personal loan, online lenders have proliferated over the years, and these days are easy to search for and find with just a few keyboard strokes and mouse clicks.
Along with from-the-comfort-of-your-home convenience, online lenders may offer the added bonus of instant or near-instant loan decisions and don’t require you to be a member of or account -holder at any specific financial institution. That said, it may take longer to disburse your check or receive the transfer initiated by the lender than it would if you were borrowing from a bank or credit union where you already hold an account.
Where Can You Get a Personal Loan With Bad Credit?
A personal loan with no collateral, which is more common than a secured personal loan, can be a little tough to qualify for if your credit history is less than perfect. Since there’s no collateral like a house or a car for the lender to take if you fail to repay the loan, unsecured personal loans often come with steeper qualification requirements than other types of loans. They may also have higher interest rates, especially for those whose credit could use some improvement.
There are some lenders out there who specifically market their products to folks with lower credit scores — but beware because sometimes these loans come with predatorily high-interest rates and other detractors.
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Online Private Lenders
The convenience and ubiquity of the online personal loan market is a mixed blessing. Sure, it’s easy to find a loan when you need one, but it’s also easy to fall into a bad deal.
Some online lenders specialize in offering loans for poor or no credit, but be sure to read all the fine print before you hit “submit” on your application; the loans may come with soaring interest rates, high origination fees, or other hidden costs that can just make your financial life that much harder in the long run.
Payday loans have been around for a long time, but that doesn’t mean they’re a good option.
Designed to be repaid quickly (i.e., at the borrower’s next payday), these short-term cash loans may be for small amounts, but often come with astronomical interest rates. According to the Consumer Financial Protection Bureau , it’s not uncommon for these quick-turnaround loans to have APRs as high as 400%.
In almost every instance, when comparing payday loans vs. personal loans, payday loans are worth avoiding in favor of other forms of unsecured loans that likely come at lower interest rates and more favorable repayment terms. Fortunately, it is possible to find loans from reliable lenders — even with imperfect credit.
Banks and Credit Unions
Banks and credit unions each set their own qualification requirements for their unsecured personal loans, so it’s worth shopping around to find the best fit for your financial needs. Additionally, they may have other financial products that could work for you, like secured credit cards or share-secured loans.
What Are Some Pros and Cons of Different Types of Lenders?
Now that we’ve covered some of the main options for personal loan shopping, how do you figure out which of these lenders is right for you? Each alternative comes with its own pros and cons — here are some things to consider while you’re browsing.
Personal Loans From Banks
|Pros of Personal Loans From Banks||Cons of Personal Loans From Banks|
|You may get a discounted rate if you’re already a member.||You may need to be an existing customer or have good credit to qualify.|
|Funds may show up more quickly if you have an existing account there.||You may have to go to the physical bank to apply.|
Personal Loans From Credit Unions
|Pros of Personal Loans From Credit Unions||Cons of Personal Loans From Credit Unions|
|Loans may come with lower interest rates and fees than other financial institutions.||You’ll need to meet whatever eligibility requirements are necessary to be a credit union member in the first place.|
|Qualification requirements may be minimal.||You may have to go to the physical credit union to apply.|
Personal Loans Online
|Pros of Personal Loans From Online Lenders||Cons of Personal Loans From Online Lenders|
|Online lenders make it convenient and easy to apply for a personal loan from the comfort of your home.||It can be difficult to know for sure if you’re borrowing from a reliable, legitimate source.|
|A wide variety of lenders can be shopped for and compared easily through an online search.||Some online lenders may charge high interest rates and other fees.|
Choosing a Personal Loan Lender
No matter where you choose to apply for a personal loan, the best way to determine whether it’s the right loan for you is to look at the fine print. The lender matters less than the loan, and knowing what you’re agreeing to ahead of time is key in avoiding an unpleasant financial surprise.
Here are some of the most important factors to look for when shopping around for a personal loan:
• Fees, such as origination fees, early repayment penalties, and late fees, which can increase the total amount you’ll spend on your loan in no time. Ideally, you’ll want to look for a lender who charges few fees — or none at all.
• Interest rates, which can vary widely with unsecured personal loans, from as low as 4% to as high as 30% or more. While your specific options will vary based on your credit history and other financial information, it’s good to shop around for the lowest possible interest rate in your case.
• Loan amount caps, which may be relatively small (e.g., $1,000) or very large (e.g., $100,000 or more). Whatever your financial need, you want to ensure your lender will offer enough for you to cover whatever expense you’re paying for.
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There are many different personal loan lenders to choose from, whether you need money to pay for an unexpected expense or you’re planning for something special. Whatever your reason, SoFi’s range of unsecured, fixed-rate personal loans may be an option worth considering.
Along with competitive interest rates and a range of terms, we don’t charge fees and we ensure our members have access to all the help they need along the way. Checking your rate only takes one minute and won’t affect your credit score.*
Where is the best place to get a personal loan?
There isn’t one “best” place to get a personal loan. What fits your financial needs might not fit someone else’s. Looking at your reason for needing a loan, how much you can comfortably borrow, and other things specific to your unique situation is a good way to narrow down places to get a personal loan.
Where is the best place to get a small personal loan?
That depends on a variety of factors. Would you be more comfortable working with a large lender or a small, community-based lender? Do you already have an account at a financial institution that also makes personal loans? It might also depend on how much you want to borrow because different lenders have different borrowing ranges.
Where is the easiest place to get a personal loan?
Again, there is no one definitive answer to this question. It might be best to begin your personal loan search at a financial institution where you already have an account. In that case, your financial information will be on record and there may be fewer steps in the process.
Photo credit: iStock/solidcolours
*Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.
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