Personal loans can be used for anything & everything. Whether your car is broken or you need to pay your bill or medical emergencies, a personal loan can help you ease your worries immediately.
Direct lender loans online are available in various forms – banks, online lenders, credit unions, and peer-to-peer platforms. It would help if you weighed your options with different lenders before making up your mind.
Types of personal loans
Personal Loans from a bank
Most banks offer personal loans. Some local banks also offer personal loans.
Pros:
- If you already have an active account at a bank that offers personal loans, you can have all your loan & banking services in one place.
- Some lenders offer loans of up to $100,000 to those who qualify.
- You can expect low-interest rates for borrowers with good credit scores, depending on how much you borrow and the bank you borrow from.
- Many banks offer different ways to apply; online, by phone, and in person.
Cons:
- Many banks let you apply in a few different ways, but some won’t let you find out if you’re eligible for the loan without using one first. That means your application may get rejected, face a credit score dip, and apply elsewhere.
- While many personal loan lenders can approve or reject your loan application after you apply, the timeline for receiving your loan amount can vary. Banks can typically transfer the funds within a couple of days. Still, the timing can depend on whether you have any past relationship with the bank or are opening a new account, along with the institution’s size.
Personal loans from credit unions
While banks are for-profit bodies, credit unions are not-for-profit financial companies, which means the lending process is different.
Pros:
- Federal credit unions limit interest rates to 18%. Some online lenders cap as high as 36%.
- Since credit unions are not-for-profits, they operate to help their members/owners. So most of the money they make gets divided between their members and the community they’re based in. As a result, loan rates from credit unions are often lower than banks trying to grow profit.
- Federal credit unions offer payday alternative loans that range from $200 to $1,000, so you can avoid taking out a high-interest payday loan.
Cons:
- Most credit unions require you to become a member before taking advantage of their offers, but it varies from institution to institution. Some let you join and open accounts on the same day. In contrast, others might have a more strict approval process based on qualifying criteria.
- Credit unions usually need help to compete with the convenience and technology of big banks. In the age of technology, many small credit unions may need more resources to keep up digitally.
- Many credit unions don’t have a prequalification option. Fund approval and transfer might take longer than traditional banks and online lenders.
Conclusion
Different types of personal loan lenders may be the best suitable for each loan borrower. While lenders have other criteria for qualifying for a personal loan, it’s best to have a good credit score. A good credit range, usually between 670 and 739 or higher, will give you more favor with lenders and better interest rates. You may also need to provide income and employment information while applying. The less you pay in fees, the less money you will have to pay on top of your principal balance.
