If you’re looking for a personal loan but don’t want to go through a traditional bank, you still have several great options.
While banks are a common choice for borrowing, some of the most competitive personal loan offers now come from credit unions and online lenders.
Each of these alternatives has its own advantages and disadvantages. Online lenders are known for fast loan approvals and quick disbursement of funds, but their interest rates can be higher compared to other lenders.
Credit unions, on the other hand, usually provide loans at lower interest rates, though they may be slightly less convenient because you’ll need to become a member first.
In the end, the most important thing is to pick a loan based on terms that fit your financial situation. Consider the interest rate, repayment period, and your chances of approval.
Before committing to any loan, take time to compare offers from different institutions to make sure you’re getting the best deal.
Key Points to Remember
- If you’re not going through a bank, you can still apply for a personal loan from a credit union or an online lender.
- Credit unions often give loans with lower interest rates and may be more flexible with borrowers who have low credit scores.
- You’ll need to join a credit union before applying for a loan there.
- Online lenders make borrowing easy and fast, but their loans can come with higher interest rates and additional fees.
- Use online tools, like Investopedia’s personal loan calculator, to estimate how much your loan will cost overall.
Online Lenders Offering Personal Loans
Online lenders are growing in popularity because they make borrowing simple and fast. You can usually complete the application online in just a few minutes, and many lenders will approve and send your funds on the same day. These platforms also make it easy to compare different loan offers side by side.
What You Need to Apply
Some online lenders are more open to working with borrowers who have less-than-perfect credit scores. However, you still need to ensure you can afford the repayments.
Most online lenders offer a “pre-approval” process that only requires a soft credit check—this won’t hurt your credit score.
But once you officially apply, they will run a hard credit check, which might slightly lower your credit score temporarily.
Pros and Cons of Online Lenders
Pros:
- Fast and easy application: You can apply from your phone or computer without visiting a branch.
- Quick access to funds: Some lenders release funds on the same day you apply.
- Flexible credit requirements: Certain lenders approve loans for people with lower credit scores.
Cons:
- High interest rates: Especially for people with poor credit, rates can be much higher than other options.
- Customer service limitations: Since most online lenders don’t have physical branches, it might be hard to get personal help when you need it.
Best For:
- Borrowers who want fast loan approval and funding.
- People comfortable reading and understanding loan details on their own.
- Individuals with poor or average credit who need access to money quickly.
Credit Union Personal Loans
Credit unions are nonprofit organizations that offer financial services similar to banks, such as savings accounts, loans, and mortgages.
Because they don’t aim to make profits, credit unions often provide loans at much lower interest rates than banks or online lenders. However, you’ll need to become a member before applying, which may take some time and effort.
Joining and Applying
To apply for a personal loan from a credit union, you must first become a member. Membership requirements vary, but many credit unions allow you to join easily online.
Once you’re a member, credit unions usually have more lenient loan approval standards. They may look at your overall financial situation and be willing to lend to people with lower credit scores or limited credit history.
Some credit unions even let you apply online, though others might require you to visit a branch in person to complete the loan process.
You can check with well-known credit unions such as NASA Federal Credit Union, Teachers Federal Credit Union, or even your own financial institution, which may offer similar options.
Pros and Cons of Credit Unions
Pros:
- Lower interest rates: Credit unions often have better rates than both banks and online lenders. For example, the National Credit Union Administration capped the interest rate at 18% as of November 2024.
- More flexible lending: Borrowers with poor credit may still qualify due to looser loan requirements.
- Better customer service: Credit unions are member-focused, so you’re more likely to receive personalized support.
Cons:
- Membership needed: You must become a member before applying, which may involve filling out forms and paying a small fee.
- Lower loan amounts: Since credit unions are smaller than big banks, they may not offer large personal loans.
Best For:
- Borrowers seeking the lowest possible interest rates.
- People with bad credit.
- Those who don’t need the funds urgently and are okay with becoming a credit union member.
Other Options If You Can’t Qualify for a Personal Loan
If you’re unable to get approved for a traditional personal loan—often due to a low credit score—there are still several alternatives worth considering:
- Credit cards: These can be handy for purchases, but carry high interest if not paid off monthly. As of September 2024, the average credit card APR was about 24.74%.
- Home equity loans or HELOCs: If you own a home with equity, you might qualify for a loan using that equity as collateral. These usually have lower interest rates than personal loans, but the risk is losing your home if you can’t repay.
- Peer-to-peer (P2P) lending: Through platforms like LendingClub or Prosper, you can borrow money directly from individual investors. These loans can sometimes have better rates and be more accessible to those with poor credit.
Common Questions
Where Should I Apply If I Have Bad Credit?
If your credit score is low, a credit union is likely your best option—if you don’t need the money right away. They’re more forgiving when it comes to credit issues.
If you’re in a hurry, some online lenders also cater to people with bad credit, but make sure to compare several options and understand the full cost.
What’s the Easiest Way to Get a Loan?
Online lenders offer the easiest application process. You can complete everything online and get your money within a few days, sometimes even faster.
Can I Get Money Instantly?
Yes, some online lenders can approve and transfer funds the same day you apply. Just be careful to read the terms—they might include high interest rates or hidden fees.
Can I Borrow from PayPal?
Yes, PayPal offers three borrowing options: PayPal Working Capital, PayPal Business Loans, and PayPal Credit. These are mostly designed for business use.
What Are Loan Apps?
Loan apps allow you to borrow money using your phone. Apps like EarnIn, Brigit, and Dave let you borrow small amounts and repay them on your next payday. Be cautious though—falling behind on payments can lead to expensive fees.
Final Thoughts
You don’t have to rely on banks to get a personal loan. Online lenders and credit unions both offer solid alternatives, and each has different strengths. If you want speed and convenience, online lenders are hard to beat.
If you’re looking for the lowest rates or have bad credit, a credit union may be your best option. Just make sure to understand all the loan terms—including interest rates and fees—before signing up.
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