You will find unsecured loans from several kinds of lenders, including online-only lenders, banks and lending institutions. These flexible loans really are a popular option since you can make use of the funds for nearly anything.
An Experian report found that there were 42.7 million personal bank loan accounts open by the third quarter of 2023. Some borrowers make use of the money to consolidate higher-interest credit debt, but you could also use it to create a large purchase or cover other bills.
3 Popular Types of Personal Loan Lenders
The interest rates and terms of your loan offers are usually more essential compared to type of lender issuing the borrowed funds. However, you still want to know where you can search for offers.
Also, you need to understand that lenders often market their personal loans using different names to focus on various borrower needs. You might see offers for debt consolidation reduction loans, wedding loans, moving loans or emergency loans, for instance—however these are typically unsecured loans, and you won't necessarily be limited to while using funds for your purpose.
Online Lenders and Marketplaces
Some online-only financial technology firms specialize in personal loans. Experian found the proportion of unsecured unsecured loans from online lenders grew from 22% in 2023 to 49.4% in 2023.
Online lenders issue loans straight to borrowers, and some focus on a particular type of mortgage or borrower. For instance, Happy Money concentrates on personal loan borrowers who wish to consolidate their credit debt, while Avant makes its loans available to those who have fair credit.
Online lending platforms manage a little differently. The experience may be similar for borrowers, but the funds for the loans come from individual and institutional investors instead of a single financial institution.
Either option may offer a streamlined app- or browser-based application and review process. One thing to keep in mind: You won't be able to go to a branch because online lenders don't provide physical locations for customers.
Banks
Traditional banks offer unsecured loans as well. One potential advantage is that you could possibly have the money directly deposited into an account you have in the bank, which could provide you with quicker access to the funds. However, some banks could need you to go to a branch to accomplish the application process, which might be more time-consuming than dealing with a web-based lender.
There's also some overlap between banks an internet-based lenders. For instance, LightStream offers unsecured loans online, but it's a division of Truist Bank. And LendingClub, which began like a peer-to-peer marketplace, has become a bank. Both companies offer unsecured loans, and a variety of other financial products and services.
Credit Unions
Credit unions are not-for-profit banking institutions that serve their visitors with many bank-like products, for example loans and deposit accounts. Lending institutions return their profits to members and may offer loans with lower fees and rates.
For instance, federally chartered credit unions (they'll usually have “federal” within the name) are interested rate cap of 18% on their loans. Based on the National Bank Administration (NCUA), the national average rate of interest on the three-year personal bank loan from a credit union was 8.95% within the second quarter of 2023; the typical rate on the same loan from a bank was 10.09%.
Before you can aquire a loan from the credit union, you'll typically have to registered as a member. Some lending institutions have strict criteria for membership, such as living in a certain region or working for a particular employer. Other medication is available to almost anyone—they simply require a one-time donation to a partner charity.
How to select a Personal Loan Lender
You may want to choose a loan from the lender you already use, or you might want an in-person knowledge about a lender that has a branch nearby. However, if you're looking for the best rates and terms, comparing multiple personal bank loan offers may be beneficial.
Before applying, you are able to narrow down your potential listing of lenders by:
- Ruling out lenders that do not be employed in a state.
- Reviewing the lender's minimum or maximum loans to make sure they align with your needs.
- Looking for origination fees, which may be removed from or put into the loan amount. Some lenders haven't any origination fees or base the charge, in part, in your credit.
- Seeing if your lender includes a prepayment penalty. These aren't common on personal loans but could make paying down the loan early more expensive.
You may also search for lenders that provide personal loan prequalification with a soft credit inquiry, which won't affect your credit score. After submitting several preapprovals, you are able to compare your offers' interest rates (APRs), loans, monthly payments and repayment terms to see which lender might be best. Then apply with whichever lender offered you the best loan.
Consider Shopping Around for any Loan
Using a service like Experian CreditMatch™ could make it simpler to determine where to get an unsecured loan. Once you produce a free account and log in, you are able to submit an unsecured loan prequalification request without having affected your credit. Experian then searches for loan offers from multiple partner lenders and supplies you with the outcomes. The offers remain valid for 30 days, so you have plenty of time to check them.
All specifics of LightStream continues to be gathered independently by Experian and it has not been provided or reviewed by the issuer. Offer details might be outdated. See issuer website for current details.