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Where to Get a Personal Loan

Where to Get a Personal Loan
September 12
10:37 2017

Borrowers with good to excellent credit (690 and above) have the widest options when it comes to shopping for a personal loan. They’re also likely to qualify for the largest loans and the lowest rates.

Lenders view borrowers with average or bad credit as higher risks, and some may not offer loans as a result. But a bad credit score, one that’s below 630, doesn’t mean you can’t get a personal loan. Credit unions and some online lenders offer loans to people with bad credit, considering factors beyond their credit score.

Personal loans from banks

Few major banks and financial institutions offer unsecured personal loans. Those that do cater to borrowers with good credit. If you’re already a bank’s customer, you might get benefits such as applying without visiting a branch or qualifying for a larger loan amount.

Some large banks offer free credit scores or loans with no origination fee.

Big banks that make personal loans are:

  • Citibank: Lends mainly to prime borrowers and limits amount to $12,500 for new customers
  • Discover: Focuses on debt consolidation loans and provides free FICO scores, whether you’re an existing customer or not
  • Marcus: Online lender from Goldman Sachs that charges no fees and gives borrowers the option to skip a payment after 12 months of on-time payments
  • Wells Fargo: Lets borrowers choose to have money sent directly to creditors for debt consolidation

Some of the best-known national banks, like Bank of America and Chase, don’t offer unsecured personal loans. They do offer other credit products, such as mortgages, home equity lines of credit and credit cards.

A local community bank may offer personal loans. Existing customers in good standing with the bank have the best chance of getting the lowest rates.

Personal loans from credit unions

Credit unions are not-for-profit financial institutions that serve members who live, study, work or worship in a particular area. To apply for a loan, you need to become a member first.

A local credit union may offer personal loans with lower interest rates and more flexible terms than loans from other lenders. Credit unions often are willing to work with members who have fair or bad credit.

If you’re looking for a small personal loan — less than $2,500 — a credit union should be your first stop. Some lenders don’t offer such small loans.

Personal loans from online lenders

Online lenders are a convenient way to search for loans. Most quote rates and terms during a preapproval process after a soft credit check. That’s just an inquiry and doesn’t hurt your credit; a hard credit check is an actual application for credit that may briefly ding your credit score.

The sheer competitiveness of the personal loan market means online lenders try harder to set themselves apart from traditional lenders, either with lending guidelines that go beyond traditional credit-scoring models or with extras like flexible payments, no fees or ways to lower your interest rate during repayment.

Online lenders like Earnest, Light Stream and SoFi are geared to strong-credit borrowers, offering high loan amounts and low interest rates. Credit scores of 690 to 719 are considered good, while those 720 and above are excellent.

Other lenders cater to borrowers with less than perfect credit. Avant and LendingPoint are a few examples. Rates are higher, but it may be easier to get approved with a credit score that is average (630 to 689) or bad (300 to 629).

Borrowers with bad credit can consider:

  • An online lender for borrowers with bad credit. Some consider nontraditional factors like earning potential in their underwriting decisions.
  • A secured personal loan. You’ll need collateral like a car or a certificate of deposit.
  • A co-signer loan. A friend or relative with good credit may help you qualify for a loan or a lower interest rate. The co-signer is responsible for paying the loan if you don’t.

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