We rounded up our picks of big banks offering personal loans with some of the best APRs and terms.
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Personal loans can be used for a variety of expenses, including weddings, vacations, home repairs and even as a way to cover emergency costs. There's a lot to learn about personal loans, but one draw is that they can sometimes be a more affordable alternative to credit cards since they typically carry a lower interest rate (though, the rate you receive will depend on how healthy your credit score is). Personal loan APRs average 9.58%, according to the Fed's most recent data. Meanwhile, the average credit card interest rate is around 16.30%.
There are a few different ways you can go about applying for a personal loan from a lender. You can go through a peer-to-peer lending site, take a look at some smaller financial institutions, or, of course, apply for a loan through a big bank.
Select evaluated personal loans offered by a variety of big banks. We looked at key factors like interest rates, fees, loan amounts and term lengths offered, plus other features including how your funds are distributed, autopay discounts, customer service and how fast you can get your funds. (Read more about our methodology below.)
When searching for a personal loan, it can be helpful to compare several different offers to find the best interest rate and payment terms for your needs. With this comparison tool, you'll just need to answer a handful of questions in order for Even Financial to determine the top offers for you. The service is free, secure and does not affect your credit score.
Personal loans: Everything you need to know
Personal loans can be helpful for meeting a variety of financial needs when using a credit card or paying cash isn't an option. A personal loan is a type of installment loan, which means as you make payments the balance goes down until it reaches zero. If you're considering a personal loan for any reason, here's what you can expect.
Types of personal loans
A personal loan can be secured or unsecured. A secured loan requires collateral, while an unsecured loan would not. For example, some banks and credit unions offer savings secured personal loans, where a savings account or certificate of deposit serves as collateral.
SHOULD YOU GET A PERSONAL LOAN TO PAY OFF CREDIT CARD DEBT?
In terms of what a personal loan might be good for, here are some of the most common uses:
Debt consolidation
Home improvements
Medical bills/expenses
Wedding expenses
Vacation expenses
Moving expenses
Vehicle financing
Veterinary bills
Tax debt
While you might be able to get a personal loan for student loan debt consolidation, that's usually not the best option. If you have federal student loans, for example, rolling them into a personal loan would mean losing the option to defer payments or take a forbearance, if necessary.
Personal loan terms
When checking personal loan offers, it's important to pay attention to the loan terms. Specifically, that means:
How long you have to repay the loan
The amount you're approved to borrow
Your interest rate on the loan
Any fees the lender charges for the loan
Personal loans can have a fixed or variable interest rate. Fixed-rate personal loans carry the same rate for the life of the loan. That allows for predictability when budgeting for monthly payments and it's possible to calculate the total amount of interest paid beforehand.
PERSONAL LOAN OR HOME EQUITY LOAN: WHICH IS BETTER?
Variable-rate personal loans can see the rate increase or decrease over the loan term, based on the movements of an underlying benchmark rate. If the rate increases, payments could increase, as would the amount of interest paid.
One of the most significant factors for determining personal loan interest rates is credit history. Lenders are more likely to offer better rates to borrowers with a higher credit score, while a lower credit score might trigger a higher rate.
How to apply for a personal loan
Applying for a personal loan starts with choosing a lender. Remember, personal loans can be offered by banks, credit unions, online lenders and peer-to-peer lenders.
HOW TO GET APPROVED FOR A PERSONAL LOAN
The next step is completing the application. Lenders typically ask for this type of information when applying:
Name
Address and phone number
Date of birth
Social security number
Employment status and income
Requested loan amount and loan purpose
Monthly housing payment
Lenders may also ask for supporting documents, such as bank statements or pay stubs to back up financial information. The lender may perform a soft credit pull initially, followed by a hard pull of your credit score and reports.
Pros and cons of personal loans
Personal loans can help close cash flow gaps relatively quickly and for borrowers who qualify for the lowest interest rates, they may be a cheaper alternative to credit cards. They offer flexibility, in that personal loans can be used for almost any reason and excellent credit isn't required for approval.
On the other hand, personal loans may be expensive for borrowers whose credit doesn't allow them to lock in the lowest rates. And some borrowers may be denied altogether if they don't have sufficient credit.
Finally, personal loans may not be an effective debt consolidation tool for borrowers who end up accumulating new debt after taking out the loan
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