Where To Get a Personal Loan? (2024 Guide)

Personal loans are typically unsecured installment loans, sometimes referred to as “good-faith loans” or signature loans. You don’t have to pledge any collateral, such as your house or your car. Instead, the amount you can borrow and the interest rate you pay are based on your creditworthiness.

Dozens of lenders offer personal loans, and while there is some overlap, these institutions fall into four main categories: 

• Online lenders
• Banks
• Credit unions
• Peer-to-peer lending platforms 

Each comes with a different set of advantages and disadvantages and is best suited to a different type of borrower.

Many financial institutions now operate completely online. This allows them to save on the overhead of keeping up customer-facing locations and pass savings and efficiency on to their customers. 

These lenders generally offer a quick, convenient, web-based application process and often approve a loan in a few hours and disburse loan funds in as little as one business day. Popular online lenders include SoFi, LightStream, LendingPoint and others.

Pros and Cons of Online Lenders

Online lenders allow you to apply via app or website without leaving your home. However, the ease of use comes with a few potential pitfalls, including potential scams. 

Banks have been around for centuries, and while the percentage of personal loans held at banks is declining, they still hold the lion’s share.

Banks that issue personal loans can be as big as JP Morgan Chase or Citi, as small as your local, Main Street bank, or somewhere in between. Most banks (regardless of size) issue personal loans in some form.

Pros and Cons of Banks

If you prefer to conduct your financial business in person, banks offer direct customer service. However, the application process may take longer and be less streamlined than that of online lenders.

Credit unions look and feel very similar to banks, but under the hood, they are not-for-profit institutions owned by their customers. This means that when you join a credit union, you are a member who can vote on how the organization is run and who is elected to the board of directors.

Credit unions often tend to have lower fees and lower interest rates, as their chief purpose is to promote the well-being of their members rather than pure profit.

Pros and Cons of Credit Unions

Credit unions tend to offer personalized customer service and lower interest rates than banks. However, expect to make tradeoffs in terms of access.

*National Credit Union Administration

This relatively new type of lender is a network of investors that issue personal loans as a way to invest their money. They often fund loans that may not qualify under traditional lenders’ criteria, as the individual lenders make decisions on whether to accept applications. 

When applying with a peer-to-peer (P2P) lender, you supply the same prequalification information you would with a bank or credit union, and the platform matches you with a lender who can offer to fund your loan. 

Once you’re matched with a P2P lender, you submit a full application with the same qualifying documents you’d provide to other lenders – like pay stubs and tax forms – to complete the process.

Pros and Cons of Peer-to-Peer Lending

If you don’t meet traditional lenders’ requirements, peer-to-peer lending may provide a funding option for you. However, potential disadvantages of peer-to-peer lenders include potentially higher interest rates and added fees.

Although each of the products issued by these four types of lenders goes by the name “personal loan,” they can be very different in terms of qualifications and repayment. This variance means that each is best for a different scenario.

Loan Terms and Interest Rates

The annual percentage rate is one of the most important aspects of your personal loan, as this determines how expensive it is to borrow the money over time. A lower rate is better, but be careful to make note of anything that might alter a low rate, such as a balloon payment after a few years, excessive origination fees or an adjustable rate.

You’ll also want to ensure that the monthly payment amount is manageable for your budget.

Eligibility Requirements

Whether you can qualify for a personal loan at all is the biggest deal breaker when shopping around. If you have an unstable credit history or borderline debt-to-income ratio (DTI), continue to shop around, even if the first few lenders tell you no. Eligibility requirements vary widely from lender to lender.

Repayment Terms

Many personal loan lenders allow you to choose between varying repayment terms – such as three years or five years to pay the money back. This can allow you to more effectively manage your finances and possibly pay down your debt sooner. Longer loan terms typically give you a lower monthly payment, though you pay more in interest over the life of the loan. Shorter terms have higher monthly payments, but you pay off the debt more quickly and pay less overall.

For people facing unexpected expenses, personal loans have emerged as an important financial tool to meet needs that might not be covered in typical lending situations. These loans are issued by most financial institutions, from the oldest bank to the newest fintech app. 

This diverse landscape of lenders offers a wide variety of qualification criteria, terms and interest rates, so qualified borrowers are likely to find a personal loan that meets their needs.

As you search for a personal loan, pay close attention to the details of each lender’s offering, not just the interest rate or monthly payment. Assess your financial position, as well, and consider discussing your options with a financial advisor or credit counselor to ensure that you are borrowing responsibly and that repaying your personal loan will not cause you undue financial hardship.

Editor’s Note: Before making significant financial decisions, consider reviewing your options with someone you trust, such as a financial adviser, credit counselor or financial professional, since every person’s situation and needs are different.