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A personal loan can come in handy for a variety of reasons, whether a homeowner is facing a large upcoming expense such as home renovations, needs to cover urgent medical bills, or wants to consolidate their debt, among other situations. From emergencies to planned expenses, homeowners can cover their financial obligations with the help of a personal loan. This type of financing offers borrowers a lump-sum payment up front, which they then pay back over a set period of time and with interest.
Personal loans have many differentiating terms, though, including eligibility requirements, interest rates, repayment conditions, and additional fees. With so many factors to consider, shopping around and comparing the best personal loans is a good idea for anyone borrowing a lump sum. This will enable them to be better equipped to make a more informed decision regarding their financing options.
- BEST OVERALL: LightStream
- RUNNER-UP: SoFi
- BEST FOR LOW RATES: Discover
- BEST DISCOUNTS: Upgrade
- ALSO CONSIDER: Upstart
What to Consider When Choosing One of the Best Personal Loans
Before submitting a loan application and taking on a personal loan, borrowers are best served by first understanding the various nuances among the many lending options available. This way, they can select the ideal loan product for their financial situation. In some cases, it’s much more than the monthly payment amount that can impact which loan makes the most sense for a borrower’s particular situation.
Loan Amount
The loan amount is a major consideration when a borrower decides on the right personal loan for their situation, especially if they need more funds than some lenders are willing to offer. Borrowing ranges can vary from one lender to another, with some loan companies offering small personal loans of as little as $1,000. This is also true for maximum loan amounts. Some lenders cap out at $40,000 or less, while others will lend as much as $100,000. Those looking to secure a home improvement loan to pay for a kitchen remodel or other renovation project may find that some lenders do not offer a high enough loan amount to cover their expenses. Another factor influencing loan amounts is the borrower’s creditworthiness. While a lender may offer funding up to a certain limit, a borrower’s credit score will also determine how much the lender is willing to extend with a personal loan.
Minimum Credit Score
Lenders consider the borrower’s credit score to be a key factor in determining their eligibility for a personal loan. A higher credit score demonstrates to the lender how the borrower can handle credit and if they have a history of making on-time payments. As noted by Jeff Rose, a certified financial planner and founder of the personal finance blog Good Financial Cents, a borrower’s credit score could impact not only the terms of their loan but also whether their application is approved at all. “A credit score plays a big role in both whether you get approved for a personal loan and what interest rate you’re offered,” he says. “A higher score usually means better chances of approval and lower interest rates. Lenders use your credit score to gauge how likely you are to repay the loan. If your score is high (typically 740 and above), you’re seen as a lower risk, which can lead to a lower interest rate.”
With that in mind, it’s a good idea for borrowers to keep an eye on their credit score if they plan to get a home improvement loan or other type of personal loan. If a borrower has a fair or even poor credit score, it doesn’t necessarily mean they can’t qualify for a personal loan. Some lenders may extend easy-to-get personal loans to borrowers with poor credit, but they may come with higher interest rates or lower loan amounts.
Annual Percentage Rate
The annual percentage rate, or APR, reflects the total cost to borrow money from a lender, including interest and associated fees. Lenders often post personal loan rates that cover a wide range—6.5 percent to 30 percent, for instance—which can give borrowers a good idea of how expensive or affordable each option is. However, they won’t know the exact interest rate they might receive on a personal loan until they prequalify for a personal loan or submit an application. Lenders in this space are highly unlikely to offer no-interest personal loans, although it’s possible that borrowers may receive introductory offers of 0 percent financing for an initial period. Because the APR directly impacts the borrower’s loan payment and total cost of financing, it’s a good idea for them to look closely at the rates listed for each lender they are considering.
Application Process
The loan application process also varies from lender to lender. Some companies work exclusively online, while others may have local branches to visit or loan officers reachable over the phone. Borrowers may be able to submit an application through an online loan portal or mobile app, which could be a quick and convenient way to apply for financing. Brick-and-mortar banks, credit unions, and financial institutions may offer an in-person option for a more hands-on and guided application process.
If a borrower can get their documentation and materials together before applying for a loan, then it can also help speed up the process. Personal loan requirements may include documentation such as pay stubs or tax returns for proof of income, a utility bill or mortgage statement for proof of address, and a government-issued ID or Social Security number for proof of identity.
Funding Time Frame
If a borrower needs funds in a hurry, then checking the lender’s funding time frame is another crucial consideration. Traditional banks and credit unions may take as long as 90 days to fund a loan depending on how the borrower plans to use the funds. Online lenders typically provide the funds much more quickly, with many of them offering next-day or even same-day funding once a loan application has been approved.
Having proper documentation ready to go and answering any additional questions as quickly as possible can help speed up the application process and also make it quicker for a borrower to finally receive their funds. When it’s time for funding, many lenders directly deposit the lump sum into an eligible bank account. However, those planning to use a personal loan to consolidate debt may be able to have their loan funds sent directly to their various creditors.
Repayment Term
The repayment term also has a strong bearing on how much the borrower pays each month (in addition to the interest rate and fees). The repayment term is the length of time the borrower has to pay back their loan, which is outlined in a monthly payment schedule. Short-term personal loans (those with repayment terms under 12 months) often have lower interest rates, but the monthly payment will be much higher because the loan amount is divided among fewer payments. Long-term personal loans can mean a smaller monthly payment, but the borrower will likely pay more in the long run due to higher interest rates. Because the repayment period determines both the monthly loan payment and the total interest paid on a loan, borrowers may want to compare different options to see what makes the most sense for their monthly budget.
Fees
Lenders may assess a variety of fees that borrowers are required to pay when taking out a personal loan, including origination fees. An origination fee covers the lender’s administrative costs for reviewing a loan application, vetting the borrower’s eligibility, and extending loan funds. These fees are typically calculated as a percentage of the loan amount. A borrower may also want to take note of any late fees in case they fall behind on their payments as well as other potential charges they may be required to pay under certain circumstances.
“Fees can really add up on loans if you aren’t paying close attention to the fine print,” says Rose. “Beyond the interest rate, there are origination fees, which are charged up front and can range from 1 percent to 6 percent of your loan amount. Then there are late-payment fees if you miss a payment, and some lenders might even charge you for paying off your loan early, [which is] known as a prepayment penalty.”
Discounts
Discounts can make a personal loan slightly more affordable for borrowers so they can more comfortably make their monthly payments. Common discounts might include lower interest rates for borrowers who enroll in automatic payment programs. In other cases, lenders may even offer discounts to borrowers depending on how they use their funds. For example, borrowers may receive a lower rate on their personal loan if they plan to consolidate debt with that money. No matter what the discount is for, it can mean substantial savings over the life of the loan. Discounts will depend on the lender, though, and some may not offer many—if any—additional cost-saving opportunities.
Our Top Picks
The best personal loan lenders can help borrowers secure funding in a short amount of time (in some cases the same day) with competitive interest rates, generous lending amounts, and few or no fees.
Best Overall
LightStream
Why It Made the Cut:
LightStream offers generous loan amounts, a wide range of loan repayment terms, and competitive interest rates to qualified borrowers.
LightStream stands out among personal loan providers for many reasons, including its rate-beat program. The company will undercut any offer from a competing lender on an unsecured personal loan, lowering the borrower’s rate by 0.1 percentage points. In addition, there are no fees required to take out a loan. The competitive interest rates and lack of fees can lower the total cost of financing for a borrower. In addition, if a borrower is unhappy with their loan experience for any reason, they can get up to $100 back through LIghtStream’s money-back guarantee program.
While LightStream only extends personal loans to borrowers with good-to-excellent credit, the company does not set any strict credit score limits. Rather, it weighs an individual’s entire financial situation to determine their creditworthiness. If a borrower does qualify for a loan, then they may have access to borrowing up to $100,000 as well as a wide range of loan repayment terms that can run between 36 and 144 months. Also, because LightStream operates as an online lender, it’s possible a borrower can receive funding the same day their loan is approved.
Specs
- Loan amount: $5,000 to $100,000
- Quickest funding time: Same day
- Repayment terms: 36 to 144 months
- Fees: None
- NMLS Unique Identifier: 399803
Pros
- High $100,000 maximum loan amount
- Same-day funding possible
- Lower interest rates via rate-beat program
- Wide variety of repayment terms ranging from 36 to 144 months
- No fees required
- $100 money-back guarantee
Cons
- Good-to-excellent credit required
Runner-Up
SoFi
Why It Made the Cut:
With possible same-day funding, flexible repayment terms, and a no-fee policy, SoFi may be a great option for those looking for a personal loan.
SoFi is worth serious consideration for borrowers who prefer an online-only, all-digital lending experience. Not only does SoFi offer high borrowing limits of up to $100,000 for qualified borrowers, but it’s also possible for borrowers to receive their funds the same day they receive loan approval. The company’s no-fee policy is another standout feature, which means a borrower doesn’t have to worry about origination fees or even late fees.
SoFi’s personal loans may have a relatively high minimum APR compared with others, but rates will depend on a borrower’s specific credit profile and financial situation. In addition, SoFi offers a generous discount for those who sign up for automatic payments, reducing their APR by 0.25 percentage points. In a worst-case scenario, if a borrower becomes unemployed before repaying their personal loan, then they may qualify for SoFi’s loan forbearance program. Eligible borrowers can modify their loan payments for up to 12 months and may even receive job-placement assistance from the lender.
Specs
- Loan amount: $5,000 to $100,000
- Quickest funding time: Same day
- Repayment terms: 24 to 84 months
- Fees: None
- NMLS Unique Identifier: 1121636
Pros
- High $100,000 maximum loan amount
- Same-day funding possible
- No fees required
- Generous autopay discount available
- Loan forbearance available for unemployed borrowers
Cons
- Relatively high minimum APR
Best for Low Rates
Discover
Why It Made the Cut:
Borrowers who take out a Discover personal loan may receive a competitive APR on their loan, along with various repayment options and helpful online resources.
Discover offers a wide range of financial services and products, one of which is also personal loans. Discover’s personal loan offerings are worth considering by anyone on the hunt for a competitive interest rate. The company can offer a relatively low APR on a personal loan, depending on the borrower’s creditworthiness and financial situation. As such, borrowers may receive favorable loan terms that help minimize the overall cost of financing.
Borrowers do need an annual income of at least $25,000 to qualify for financing, and Discover caps loan amounts at $40,000. However, the company gives borrowers plenty of ways to repay their loan, such as through the dedicated mobile app, automatic payments, wire transfers, electronic bill pay, and online through the company’s secure account center. These payment options can make it more convenient for a wide range of people to repay their personal loans. Discover’s website also has multiple helpful calculators to assist those considering a personal loan. In particular, the site’s personal loan calculator can show prospective borrowers how much financing will cost them out of pocket, while the debt consolidation calculator can highlight long-term savings from using a personal loan to pay down debt. These resources can go a long way toward helping borrowers decide if it makes financial sense to take out a personal loan.
Specs
- Loan amount: $2,500 to $40,000
- Quickest funding time: Next business day
- Repayment terms: 36 to 84 months
- Fees: Late-payment fee
- NMLS Unique Identifier: 684042
Pros
- Relatively low APR range
- Helpful personal loan and debt consolidation calculators
- Wide range of loan repayment options
Cons
- Somewhat low $40,000 maximum loan amount
- Annual income of at least $25,000 required
Best Discounts
Upgrade
Why It Made the Cut:
A personal loan through Upgrade may give a borrower access to multiple loan discounts, which can add up to significant savings over the life of the loan.
Upgrade may be a good choice for those who want to consider different collateral options with their personal loan. Not only does Upgrade offer unsecured personal loans, which don’t require collateral, but it also offers secured options that do. The trade-off for putting up collateral on a secured loan can mean lower interest rates. That option may be especially appealing as Upgrade may have relatively high interest rates on personal loans depending on the borrower’s creditworthiness.
Upgrade also charges an origination fee for each loan, but borrowers may be able to lower the total cost of their loan by taking advantage of the various discounts available. They can also select a short 24-month repayment term, which will result in a lower interest rate and may be ideal for borrowers who want to pay off their balance as quickly as possible.
Specs
- Loan amount: $1,000 to $50,000
- Quickest funding time: Next business day
- Repayment terms: 24 to 84 months
- Fees: Origination fee, late-payment fee
- NMLS Unique Identifier: 1548935
Pros
- Wide range of discounts available
- Secured loan options available
- Relatively short 24-month loan repayment term available
Cons
- Relatively high maximum APR
- Origination fee required
Also Consider
Upstart
Why It Made the Cut:
Upstart considers a wide range of candidates, including those with bad or no credit, which may provide a personal loan option for someone who might not traditionally qualify.
Borrowers who have bad or no credit history may shy away from applying for a personal loan because they believe their application will be denied. However, Upstart does consider other aspects of a borrower’s finances beyond the credit score. Employment and education are also considered, which may help increase a potential borrower’s odds of approval. With that in mind, Upstart could be a viable option for those with low credit scores or no credit history at all.
Upstart does charge a loan origination fee, which adds to the cost of the loan, and borrowers can only choose between 36- or 60-month repayment terms. However, if these terms work for a borrower, then they may be able to take advantage of the lender’s competitive rates, as the minimum APR on a personal loan can be relatively low. Those who qualify for a lower rate can reduce both their monthly payments and the total cost of their personal loan.
Specs
- Loan amount: $1,000 to $50,000
- Quickest funding time: Next business day
- Repayment terms: 36 or 60 months
- Fees: Origination fee, late-payment fee, returned check fee, paper statements
- NMLS Unique Identifier: 936133
Pros
- Loan approval possible with bad or no credit
- Relatively low minimum APR
Cons
- Origination fee required
- Limited loan terms of 36 or 60 months
Our Verdict
We chose LightStream as Best Overall for the high maximum loan limits, possible same-day funding, flexible repayment terms, and money-back guarantee. SoFi is our Runner-Up pick because it also offers quick funding times, a large borrowing range, and a generous autopay discount.
How We Chose the Best Personal Loans
To select the best personal loans, we reviewed numerous lenders and weighed each company according to a variety of factors. These factors include the eligibility criteria borrowers must meet for loan eligibility (especially their credit profile), the loan amounts available, funding time frames, APR ranges, and loan repayment terms.
Another important consideration was the total cost to take out a loan. With that in mind, we examined any fees that might be charged to the borrower, discounts that might lower a borrower’s interest rate, and other perks or benefits that might appeal to those in the market for a personal loan. We also considered how funds can be used and whether there are any restrictions to take into account. The top personal loan companies often offer a great deal of flexibility in this regard. In fact, some of the best home improvement loan providers (such as SoFi and LightStream) offer financing via personal loans.
Before You Take Out One of the Best Personal Loans
Before selecting a personal loan lender, borrowers can benefit from reviewing their household budget and checking that they can handle the financial responsibility of a monthly loan payment. Those struggling to manage their personal finances may find that paying back a personal loan simply adds to their financial burden rather than alleviating it.
Potential borrowers can also check their credit scores before applying for a loan, so they know what challenges they may face during the approval process. For example, if there is any activity incorrectly listed on a borrower’s credit report, then it would give them time to have it updated and corrected before they apply for a personal loan. In some cases, prospective borrowers may decide that they are better served by taking time to improve their financial circumstances—paying down debt and building an emergency fund, for instance—rather than taking out a personal loan, along with all the obligations that come with it.
Unsecured personal loans often have higher interest rates compared with secured loans such as mortgages. It may make more sense to use another type of loan to obtain funds. For instance, there are many types of home improvement loans available, including home equity loans and home equity lines of credit (HELOCs). These options may be more affordable than a personal loan because of their lower interest rates. Home equity loans can be used for a variety of purposes as well, so it may be worthwhile to consider a loan from one of the best home equity loan providers (such as U.S. Bank or Flagstar Bank) as an alternative.
Cost of Taking Out One of the Best Personal Loans
Personal loans are rather straightforward compared with more complex financial instruments such as mortgages. A borrower can expect to see the principal amount, interest rate, and number of monthly installments needed, plus any fees. These costs are calculated based on factors such as the borrower’s credit score and the interest rate a lender charges, but exact costs can vary from one lender to another.
Another cost consideration is whether the personal loan is secured or unsecured. Unsecured personal loans mean there isn’t any collateral required to take on the loan, such as a vehicle or real estate property. A secured loan requires a borrower to put forward collateral to help minimize the lender’s financial risk if the borrower were to default on the loan. While the repercussions for nonpayment on a secured loan are more severe, this type of financing may offer lower interest rates. Although most personal loans fall within the unsecured loan category, there are some secured, low-interest personal loans for borrowers to consider.
The Advantages of Choosing One of the Best Personal Loans
Personal loans can be used for a wide variety of reasons, from paying for home renovations to consolidating debt or covering outstanding medical bills. Under the right circumstances, this type of financing can offer financial relief to homeowners who require some assistance covering all of their expenses. The best personal loans can provide many other benefits as well, including:
- Quick funding times—in some cases, delivering funds to borrowers on the same day their loan is approved;
- High loan amounts to help homeowners pay for any number of expenses, such as a bathroom remodel financing, paying for a wedding, or covering medical expenses not covered by their health insurance; and
- Discounts for enrolling in automatic payments or using funds to consolidate debt, among other scenarios, which help reduce the total cost of financing.
FAQs
Personal loan borrowers may have questions throughout the lending process. If a borrower has the answers to their questions, such as the ones below, then it may put them in a better position when selecting the best personal loan for their financial needs.
Q. Can you get a personal loan with bad credit?
Yes, it’s possible to get a personal loan with bad credit. Although some lenders have more stringent credit score requirements, borrowers can often find a lender willing to work with an applicant who has credit challenges.
Q. Can you refinance a personal loan?
Yes, a borrower can refinance an existing personal loan in many cases, which may help them receive more favorable repayment terms or a lower interest rate.
Q. How many personal loans can you have at once?
There’s no set limit on the number of personal loans someone can have at once, but lenders will look at borrowers’ existing debt when reviewing loan applications. As such, those with one or more outstanding personal loans may struggle to qualify for additional financing. A borrower will also want to review their budget and check that they handle the monthly obligation of another loan payment.