You can apply for a personal loan from a variety of lenders. While banks remain the most popular provider of personal loans, some of the best personal loans are offered by online lenders and credit unions.

The loans provided by these other organizations have pros and cons. Personal loans from online lenders are quick to fund, but might have higher interest rates. Loans from credit unions generally have low interest rates, but are less convenient because you’ll need to join the union first.

Ultimately, aim to choose a loan based on its terms, including its interest rate, how long you have to pay it back, and whether you can qualify for it. So, before you get a personal loan, it’s best to shop around at different financial institutions.

Personal Loans from Online Lenders

Many online lenders offer personal loans. The main advantage of these loans is that they are convenient. You can apply online, sometimes within a few minutes. Some lenders will send you your money within that day. Digital lending platforms also allow you to easily compare loan terms so you can get the best terms and the best fit for you.

Requirements

Many online lenders will offer a pre-approval with a soft credit check, which does not affect your credit score. When you officially apply for the loan, the lender will conduct a hard credit check, which can have a small, temporary impact on your credit score.

Pros and Cons

Pros Explained

• Convenience: You can apply for a loan quickly online from your home and avoid driving to a branch location.
• Speed: Some lenders can send you money on the day you apply, and most will process your personal loan within a few days.
• Easier eligibility: Some online lenders will give you a personal loan even if you have a low credit score, but they will likely charge you a high interest rate.

Cons Explained

• High interest rates: Some online lenders charge very high interest rates, especially to customers with poor credit scores.
• Customer service: With some online lenders, you may have difficulty talking to a human about your specific questions or needs. Very few online lenders have physical branches that you can visit.

Best For

• Borrowers looking for a convenient application process and fast funding
• Savvy borrowers who can take the time to read and understand loan terms

Personal Loans from Credit Unions

Credit unions are financial cooperatives that offer many of the same financial products as banks, like savings accounts, mortgages, and personal loans.

Because credit unions aren’t run for profit, the best credit unions can offer interest rates on loans that are significantly lower than those offered by banks and online lenders. The disadvantage is that you’ll have to become a member of the credit union before applying for a loan, which can take some time.

Requirements

To apply for a loan from a credit union, you’ll have to join the union first. Each union has its own rules about membership, but many will allow you to apply online.

Once you are a member, credit unions typically have less strict eligibility requirements for personal loans than banks. They may approve you for a loan even if you have a low credit score, or they may be more willing to take your financial or personal circumstances into account.

Some credit unions allow you to apply for a personal loan online, while others may require you to visit a branch before you accept the loan.

You can get a personal loan from many different lenders, such as U.S. Bank, Old National Bank, Teachers Federal Credit Union, NASA Federal, and more. You can check with your financial institution, too. So if you have a NASA Federal account already, you may find that NASA Federal also has personal loans.

Pros and Cons

Pros Explained

• Lower interest rates: Credit unions tend to offer lower interest rates than either banks or online lenders. The maximum interest rate that federal credit unions are allowed to charge for loans is determined by the National Credit Union Administration and was 18% as of Aug. 2023.
• Lower eligibility requirements: Some credit unions will offer loans to members with lower credit scores. Credit unions tend to have less stringent loan requirements than banks.
• Customer service: Credit unions often provide more customized personal service as they are driven by supporting their members, not by earning profits.

Cons Explained

• Membership required: You’ll have to become a member of the union before you can apply for a loan. This will require an additional step of applying to the credit union.
• Smaller loans: Since credit unions are typically smaller than banks, they may not be able to offer large personal loans.

Best For

• Borrowers who are willing to become part of a credit union
• Borrowers who don’t need their loan quickly
• Borrowers looking for the lowest interest rates
• Borrowers with poor credit
  

Alternatives If You Can’t Qualify for a Personal Loan

For many people, the benefits of personal loans are that they are a cost-effective way of borrowing a lump-sum amount that you can repay in regular payments over time. However, not everyone will qualify for an unsecured personal loan. The most common reason for this is a low credit score.

• Credit cards: Credit cards offer a convenient way of paying for purchases, but they can be costly if you do not pay the balance in full each billing cycle. The median credit card interest rate was around 23.99% as of Aug. 2023, according to Investopedia data.
• Home equity loans or home equity lines of credit (HELOCs): If you have equity in your home, you may qualify for a home equity loan or a home equity line of credit (HELOC). They use your home equity as collateral, can be easier to qualify for than a standard personal loan, and generally offer lower interest rates. The disadvantage is that you may lose your home if you are unable to pay back the loan.
• Peer-to-peer (P2P) loans: P2P loans are funded by individual investors who may be more willing to work with borrowers with less-than-ideal credit reports and credit scores. You also may get a lower interest rate than you would find with a traditional lender.

The Bottom Line

There are three main providers of personal loans: banks, online lenders, and credit unions. If you don’t qualify for a personal loan from a bank, then online lenders and credit unions can be a good alternative. Each lender has advantages and disadvantages, however, so make sure you understand the cost of your loan before accepting it.