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Enter “personal loan” into a search engine and you will probably get over a billion results. Even if only half a percent of these results are actual lenders, this is a mind-boggling amount of information to be overcome in the pursuit of a personal loan.
Would you like personal debt consolidation loan or to stretch the cost of a high-value purchase over several months, choosing the right lender is critical and challenging. Different lenders offer different interest rates and terms, which can amount to hundreds or even thousands of dollars of difference in the total cost of the loan.
Let’s take a look at some of the best places to get a personal loan and what you should know about each option.
Where to get a personal loan?
Personal loans come from four main categories of financial institutions:
- Banks: Not all banks offer loans to individuals, but there are some of them.
- Credit unions: You need to be a member of one of these non-profit organizations to get a personal loan from them.
- Online lenders: It may be easier to get a loan through one of these virtual non-banks.
- Peer-to-peer lenders: Through the online platform, individual investors lend money directly to borrowers.
Each lender will have different requirements for obtaining a personal loan and it can be difficult on the lender’s website to tell what your chances of getting approved are. You can compare your estimates for several personal loan lenders through Credible.
Personal loans from banks: good credit may be required
If you need to borrow a large amount or want a longer repayment period, a bank can be a good option for obtaining a personal loan for your needs. For example, Wells Fargo offers individual loans with a maximum loan amount of US $ 100,000 and a maturity of up to 84 months.
However, some large banks no longer offer loans to individuals. Or they may limit personal loans to small amounts for current account holders. Others that offer personal loans usually require you to have a good or even excellent credit rating in order to qualify for favorable interest rates and terms.
Funding usually happens quickly, which means you can get funds in just one business day.
Advantages of loans to individuals in the bank
- Can offer larger loan amounts than other types of lenders
- Longer maturities are sometimes allowed
- Can provide current customers with loyalty or auto payment discounts
- May waive general fees such as clearance or closing fees
Cons of loans to individuals in the bank
- You may need a good credit rating to qualify for a personal bank loan.
- Interest rates can be higher than other types of lenders
- Collateral may be required to meet requirements or to qualify for preferred rates and conditions
- You may need to open a bank account or be the owner of a checking account.
Personal loans from credit unions: flexible credit requirements, but only for members
Since credit unions are non-profit organizations, they can often offer cheaper products to their members than commercial financial institutions.
You can find lower interest rates on loan products, including personal loans, at a credit union. In addition, it may be easier for participants to obtain a personal loan with less than ideal credit.
Advantages of personal loans in a credit union
- Some credit unions offer loans for small amounts – as little as $ 250.
- You can qualify for a loan with a lower credit rating (although you can get a higher interest rate)
- Can offer alternative payday loans for as little as $ 100
Cons of personal loans from a credit union
- Must be a member to apply and be eligible for a loan
- To join, you will need to meet the membership requirements.
- May charge a commission such as a clearance fee
Personal loans from online lenders: quick solutions and financing
If your credit rating is lower, you have a flaw in your credit history, or you need money quickly, you can apply for a personal loan from an online lender. Many online lenders are available for personal loans and there are many options for people with credit problems.
Approval decisions from an online lender are usually quick, and funding sometimes happens on the same day if you are approved, depending on the lender. However, the trade-off for better chances of approval and quick funding is often higher interest rates.
Pros of personal loans from online lenders
- Many options are available for people with lower credit scores
- The application and approval process is usually completely online
- Funding is often quick – usually less than five business days, but sometimes on the same or next business day.
Cons of personal loans from online lenders
- The highest rates can be very high
- It can be difficult to find an online loan if you need a large amount
- The lender may charge processing fees, filing fees, or other fees.
It can be difficult to know what rate you can qualify for for a personal loan simply from the information on the lender’s website. With Credible, you can compare personal loan rates in just two minutes.
Beware of loan applicants
If you are in urgent need of a small amount of money and want guaranteed approval, you might be tempted to consider a payday loan or property loan. Payday lenders and title lenders usually do not require a minimum credit rating or even carry out a credit check.
Typically, you tackle a small amount of money – usually $ 500 or less – and return the full amount, plus a flat fee when you get your next paycheck two weeks later.
The Consumer Financial Protection Bureau notes that the effective annual percentage rate (APR) for a typical payday loan, which charges a flat fee of $ 15 for every $ 100 taken, is 400%. And, if you can’t fully pay off the loan the next payday, the lender can move the loan over to a new one.
Secured loans work the same as payday loans, but the lender will keep your vehicle title as collateral. You usually have 30 days to pay off a small loan, but if you cannot pay it off on time, the lender can take your car.
If you’re in financial trouble and need money right away to cover expenses, try other options like borrowing from a family member or friend, getting a personal loan from a reputable lender, or even using a credit card.
What you need to know about personal loans
When exploring the best places to get a personal loan, keep important information in mind.
Interest rates and commissions
Interest rates can vary widely from personal creditor to the lender and even from the same lender depending on factors such as the loan amount and your credit rating. Generally, the better your credit rating, the more likely you will be able to qualify for the best personal loan rates.
Also note that personal loan lenders may also charge a variety of fees, including:
- Processing Fee to Cover the Cost of Processing Your Loan Application
- Loan application fee
- Penalties for early loan repayment in case of early loan repayment
- Late payment commission if you are late or missed a payment after the start of the repayment period
Be sure to check the information provided by the lender to understand what fees (if any) they will charge for your loan.
The length of time you have to pay off the loan can also vary greatly depending on how much you borrow, the lender you choose, and other factors. Some lenders offer loan terms of only 12 months – 36 and 60 month terms are also common.
When choosing a loan term, remember that a longer term may mean a lower monthly payment, but it also means that you are likely to pay more interest over the loan term than if you took on a shorter term.
How to Prequalify for a Personal Loan
With so many personal loan options available, you might be tempted to turn to multiple lenders, but too many complex inquiries in a short amount of time can affect your credit score.
Pre-qualifying for a personal loan can help you better understand your chances of getting approved before you apply for a loan. During the application process, the lender will almost certainly check your loan, which can affect your credit rating.
But prequalification usually doesn’t affect your credit because it doesn’t involve a serious credit investigation. You can see your preliminary rates from multiple personal lenders via Crediblethat you can use for free – and all this without affecting your credit.