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Where to get a personal loan

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Demand for personal loans has been growing steadily over the past 12 months and is expected to reach or surpass pre-pandemic levels this year with almost 20 million new loan originations. Borrowers seeking to consolidate growing credit card debt are increasingly turning to personal loans as a solution.

If you’re considering a personal loan there are three main types of lenders to look to: banks, credit unions and online-only lenders. But while there are many types of lenders that can provide personal loans, there is no one best option. The best choice for you will depend on where you prefer to manage your money and the loan’s terms, fees and interest rates. Before you apply for a personal loan, look for the best offers across each type of lender.

Get pre-qualified

Answer a few questions to see which personal loans you pre-qualify for. The process is quick and easy, and it will not impact your credit score.

Where to get a personal loan

Online lenders

These digital lending platforms streamline the borrowing process, allowing you to compare personal loan rates and terms, apply online and receive an answer usually within the same day. It’s also possible to receive the loan proceeds into your account in as little as one to two business days.

A feature that sets online lenders apart is that most use a prequalification process. Online lenders can provide custom rates and terms for you after running a “soft” credit check, which won’t impact your credit. However, the lender will perform a “hard” credit check when you finalize the loan, which usually temporarily lowers your credit scores by a few points.

Some online lenders are also willing to work with people with lower credit scores. In addition to reviewing your credit history and income, they may also consider other factors, such as your job and education, when making a lending decision.

There are many online lender options to choose from. For example, you may decide to work with a peer-to-peer lender online. These loans are funded by investors instead of a traditional bank.

  • Perks: Fees may be lower, and the lending process is generally more seamless and convenient Online lenders don’t have the expense of operating a physical location, so they can pass the savings on to account holders
  • Drawbacks: Interest rates may be higher. Issuing unsecured personal loans is risky, so online lenders may charge higher interest rates compared to traditional financial institutions. You also won’t have access to a physical branch if you’d prefer to speak with a loan officer in person.
  • Best for: Tech-savvy borrowers who are comfortable applying for a loan without a live banker.


Although online lenders are now playing a bigger role in personal loan lending, brick-and-mortar banks are still lending tens of billions of dollars annually. Banks typically offer higher loan amounts but require borrowers to have higher credit scores.

Some banks offer relationship discounts if you have an existing relationship with them. For example, some banks shave 0.25 percent off your personal loan APR if you already have a qualifying account with the bank. That can help you save money over the life of the loan. If you like your bank or have been a longtime customer, ask about this type of discount.

Even if you’ve been banking with an institution for many years, it’ll still check your credit. The bank will perform a hard credit check and review your personal information before making its lending decision.

  • Perks: Loan amounts are usually higher through traditional banks. This can come in handy if you need to borrow a large sum of money. You could also qualify for a discount if you’re a current account holder.
  • Drawbacks: Traditional banks generally require a strong credit score for approval and might have stricter underwriting requirements. Furthermore, you may be required to visit a local branch in person to complete your loan application.
  • Best for: Borrowers with good credit.

Credit unions

Instead of answering to shareholders, credit unions are required to act in the best interest of their members, who are customers like you. Credit unions require membership to qualify for a personal loan, but this may be an easy hurdle to clear. For example, some credit unions just require you to make a small donation to a charity or live within a certain area.

Borrowers with average credit might have more success getting a personal loan with a credit union, especially a credit union with which the borrower already has a working relationship.

Because credit unions are nonprofit institutions, their mission may influence their lending decisions. For example, Navy Federal Credit Union, which serves members of the U.S. armed forces and the National Guard, may offer loans to borrowers who wouldn’t be approved elsewhere.

Credit unions tend to offer smaller personal loans compared to banks and online lenders, and their interest rates may be lower. The average interest rate on a three-year personal loan from a credit union is 8.77 percent, compared to 9.85 percent at a bank, according to March 2022 data from the National Credit Union Administration.

The maximum interest rate federal credit unions are allowed to charge for loans is determined by the National Credit Union Administration and is currently set at 18 percent. However, the maximum interest rate for short-term loans rises to 28 percent.

  • Perks: Credit unions generally have lower credit score requirements and may approve you for a loan if you have a positive working relationship with the institution.
  • Drawbacks: Loan amounts are smaller compared to banks due to the increased credit risk that credit unions absorb. You’ll also have to be a credit union member to be eligible for a loan.
  • Best for: Members of the credit union who have average credit and don’t need a large loan

How to choose the best lender for you

The amount of money you need to borrow, the terms you’re looking for and your financial history all contribute to determining the best personal loan for you.

Here are steps you can take to figure out which type of lender is best for you:

  1. Research personal loan rates, fees, terms and amounts at several types of financial institutions.
  2. Check eligibility requirements for each loan.
  3. Determine whether you qualify for membership at a local credit union.
  4. Check your credit reports and credit scores.
  5. Figure out how much you need to borrow.
  6. Calculate the monthly payments you can afford.

Once you’ve found the personal loan that fits your needs, research that particular lender’s reputation. Look through online reviews, the Better Business Bureau and the Consumer Financial Protection Bureau.

You can also compare personal loans on Bankrate and get prequalified without hurting your credit score.

Bottom line

Before deciding if an online lender, bank or credit union is best, use a personal loan calculator to get an estimate of your monthly payment and overall loan costs. Once you have an idea of how big of a loan you can afford, research lenders to find the best fit.

Consider getting pre-qualified with at least three lenders. If you have a relationship with a financial institution that you enjoy working with, it makes sense to see whether it can provide a competitive personal loan offer. Also, be sure to compare interest rates and fees and evaluate customer service reviews to ensure you select a lender that best suits your needs.

Learn more

Written by
Kim Porter
Contributing writer
Kim Porter is a former contributor to Bankrate, a personal finance expert who loves talking budgets, credit cards and student loans. Porter writes for publications such as U.S. News & World Report, Credit Karma and When she's not writing or reading, you can usually find her planning a trip or training for her next race.
Edited by
Loans Editor, Former Insurance Editor