You probably already know that an unsecured personal loan can help you cover big-ticket expenses, such as a wedding, paying down high-interest credit card debt, or home improvements. But what’s the difference between getting one from a bank versus an online lender? Are there any perks in going through your bank?
Below, we highlight the difference between banks versus online lenders and the benefits of getting a personal loan through your bank. Plus, we’ll walk through how to qualify for one and offer our top picks so you can choose what’s right for you.
Best Banks for Personal Loans
Loan results will vary based on creditworthiness, loan purpose, loan amount, and other factors.
Best for Small Loans
- Loan Amount: $600 – $50,000
- APR Range: 7.74% – 17.99%
- Loan Terms: 1 – 5 years
- Credit Score: 660 or higher
Pros & Cons
- Pre-qualification is available
- No origination fee, hidden fees, or prepayment penalties
- Borrow as little as $600
- Must be a member to receive the loan
- Limited customization on payment plans
- No option for direct payment to creditors for debt consolidation
PenFed Credit Union personal loans have no origination fee, hidden fees, or prepayment penalties. Some lenders charge as much as 10% to originate loans, so skirting originations fees means you can save a significant amount of money with PenFed, especially on larger loans. You can also prequalify online to see your estimated rates and loan terms without hurting your credit score.
The biggest perk? Through PenFed, you can borrow as little as $600—much lower than other banks’ minimum loan amounts.
Note that while you don’t need to be a member to apply for a loan, you will need to become a member if you prequalify and decide to proceed with the loan.
Best for Few Fees
- Loan Amount: $2,000 – $50,000
- APR Range: 6.99% – 19.99%
- Loan Terms: 3 – 5 years
- Credit Score: 660 or higher
Pros & Cons
- No origination fee or application fees, no prepayment penalties
- Fast funding within 1 business day
- Chat with team members seven days a week
- Only available in 15 states
- Late fees apply
- No option for secured loans
A personal loan through TD Bank has fewer fees than most competitors: no origination, application, monthly or annual fees. With no prepayment penalties, you have a better chance of paying off your loan early and saving on interest payments.
You can borrow up to $50,000, and funds might drop into your account in as little as one business day. A caveat: TD Bank personal loans are only available in 15 states and Washington, D.C.
Best for In-Person Banking
- Loan Amount: $1,000 – $35,000
- APR Range: 5.99% – 28.74% (varies by zip code)
- Loan Terms: 6 months – 5 years
- Credit Score: Not disclosed
Pros & Cons
- Over 2,600 locations
- Loan repayment terms up to 60 months
- Direct monthly payments to creditors for debt consolidation
- Allows co-borrowers
- Might need to finish the application in person
- Loan amounts capped at $35,000
- Loan amounts and rates vary by location
PNC Bank has more than 2,600 locations across the U.S., so you won’t have a problem finding a loan specialist at one of their brick-and-mortar locations. Plus, PNC Bank offers a variety of repayment options and the possibility of quick funding.
If you lack the credit to qualify, you have the option to apply with a co-borrower. For those who are using the loan for debt consolidation, the bank can also make direct payments to creditors to save you the hassle of transferring funds.
Banks vs. Online Lenders: What’s the Difference?
The process is largely the same whether you’re getting a personal loan through a bank or an online lender. You’ll need to provide financial and basic personal information to apply for the loan. Then, the lender will do a credit check, which requires a hard pull of your credit history.
But there are some differences between getting a loan through a bank versus an online lender:
- Bank personal loans may not offer pre-qualification. Online lenders typically offer pre-qualification options. In other words, you can receive a quote with the loan amounts, rates, and terms you will most likely be approved for without needing to run a credit check. On the other hand, banks might not offer the option to prequalify for a personal loan.
- Existing bank customers may benefit from perks. Bank personal loans usually require a higher minimum credit score. In some cases, you’ll need to be a current customer to be eligible to apply for one in the first place. However, having an existing relationship with a bank could boost your odds of getting approved or snagging a lower interest rate and better loan terms, even if your credit score is less than ideal.
- You may need to finish a bank loan application in person. Online lenders may offer a more streamlined application you can complete virtually with fast electronic deposits. On the other hand, banks may give you the option to start the entire application online, but may require a physical version that you drop off at one of its branches.
- You can talk to a human at the bank. If you prefer in-person face time, a major perk of getting a personal loan through a bank is giving them a call or walking into a brick-and-mortar location and talking to a bank rep. They can explain the process and answer your questions thoroughly.
Qualifying for a Bank Personal Loan
Personal loan requirements vary by lender, but considerations like credit score and income are approval mainstays across all institutions.
To qualify for a personal loan, you’ll need to meet these general qualifications:
- Steady income and employment verification
- Low debt-to-income ratio (40% or under)
- Good to excellent credit (it’s possible to get a loan with a lower score, but you’ll face higher rates.)
Improving Your Chances of Bank Approval
While what you need to qualify varies by bank, here’s what can boost the chances of getting approved:
- Having an existing relationship with the bank. Some banks only render loans to existing customers, and some may consider your entire customer relationship. If you have a strong history with the bank, you might increase your chances of approval for a loan, snag the most favorable rates and loan terms, and speed up approval and funding times.
- Getting your approval documents ready. Besides providing your basic financial and personal information, you’ll need to provide proof of documentation. Have these employment verifications and proof of identity documents handy:
- Pay stubs
- W-2s and 1099s
- Bank statements
- Tax returns
- Employer contact information
- Proof of identity (i.e., driver’s license, military ID, passport, or another government-issued ID)
How to Get a Bank Personal Loan
Let’s go through the steps to take to apply for a personal loan through a bank:
1. Determine your borrowing amount. Think about how you’ll use the money. You’ll need enough to cover expenses, but remember: the more you borrow, the more you need to pay back—with interest.
2. Check your credit. Before applying for a personal loan, check your credit to learn your approval odds. You can order a free credit report through AnnualCreditReport.com. If you see something incorrect or incomplete, you can file a dispute. Note you’ll need to do this directly to each credit bureau.
3. Boost your credit, if needed. Banks typically require a stronger credit score than online lenders. A higher score means lower interest rates. Pay off any active loans and credit card bills on time to improve your credit score and up your chances of landing one.
4. Reach out to your bank. A beautiful perk of getting a bank personal loan is the option to interact face-to-face with a human. Use this to your advantage. Give your local bank branch a ring or step foot inside a physical location to inquire about a loan. Ask how you can qualify for a low-interest loan, avoid a high-interest one, and then take action as needed.
5. Submit a loan application. If the bank doesn’t offer pre-qualification, you’ll need to go straight to the official loan application. Depending on the bank, you might need to drop off your application at the bank or start the process online before signing and submitting forms at a physical location.
Alternatives to Big Banks for Personal Loans
If you’re not keen on getting a personal loan through a bank, here are some other options on where you can apply for a personal loan.
As mentioned before, online lenders utilize an online application process to encourage speedier applications and funding times. And while not all banks offer pre-qualification, most online lenders do, and you can get prequalified in a matter of minutes.
There are several online lending platforms, so you’ll have no shortage of choices to pick from. Some online lenders might be peer-to-peer platforms, meaning individual investors pool their money to offer you a loan. Others might be more like go-betweens with third-party lenders. It’s often a good idea to prequalify with multiple lenders so you can compare their terms and rates.
Credit unions can be a great place to get a personal loan if you have less-than-stellar credit because the credit requirements tend to be lower.
That said, you’ll likely need to be a member of the credit union to source a loan. You’ll need to find a credit union you’re eligible to join before starting the loan process.
Friends and Family
You can also leverage your social circle for a personal loan. You might be able to agree on a loan with low or no interest and a more liberal repayment schedule.
If you choose this option, proceed carefully. Make sure you lay out all loan terms, including repayment dates, interest rates, and the amount borrowed, so lending money between friends doesn’t hurt your relationship.
Not all banks offer personal loans. Some banks only offer loans to existing customers, while other major banks, such as Chase or Bank of America, do not have personal loan products at all. It’s not a bad idea to check with your current bank first to see if they have personal loans, and whether there are incentives for current customers before looking online for lenders.
Some banks only offer loans to existing customers. Others allow non-customers to get prequalified, but they’ll need to sign with an account to move forward with the loan.
There are several perks to getting a personal loan from a bank. For one, you might be able to get better term lengths and a low-interest loan if you have a good credit score and demonstrate creditworthiness. If you prefer to speak to someone about borrowing money, you might appreciate using a bank over an online lender.