Where to Find the Best Personal Loans in 2022
A personal loan can give you the boost you need to reach your financial goals—whether that be consolidating your debt, taking on a big home improvement project, or traveling to your dream destination. Personal loans can offer flexibility and quick funding, but they’re not created equal. Finding the best personal loan means comparing several offers from different lenders. Here's what you should consider.
In This Article
- Best Personal Loans in 2022
- 4 Types of Lenders
- What Makes a Good Personal Loan?
- How to Find the Best Personal Loans
- The Bottom Line
- Common FAQs
Personal loan terms and interest rates depend largely on your credit history, income, and debts. The best personal loans available for fair credit may look different than the offers for great credit. To find the best deal possible for you, look for a lender offering the amount you need to borrow with low interest rates, minimal fees, and repayment plan options that work for your budget.
|Amount||$1,000 - $40,000||$2,000 - $35,000||$2,000 - $40,000||Varies|
|APR range||7.04% - 35.98%||9.95% - 35.99%||7.95% - 35.99%||Varies, up to 36% +|
|Average APR offered||15.95%||-||-||20.25%|
|Term||3 or 5 years||2 to 5 years||3 or 5 years||Revolving|
|Pays multiple creditors directly||Yes||No||No||No|
|Joint loans available||Yes||No||Yes||Varies|
*Information specific to LendingClub Bank valid as of 8/12/21. Information specific to other entities sourced from their public-facing websites as of 8/12/21. Average credit APR sourced from publicly available information published by The Balance as of August 2021.
Technology has opened doors in the financial world. While your local bank branch (or borrowing from friends and family) was once your only choice, you now have a range of options to consider when choosing where to get a personal loan.
1. Online lenders
Direct online lenders operate much like brick-and-mortar lenders. You’ll apply for a loan and, if approved, receive funding directly from the lender you are working with. Online lenders may offer competitive rates and an easier application process that can be completed entirely online.
For borrowers looking for convenience, applying online or through a lender’s app may be ideal. However, without a physical location, you may not be able to meet your loan officer face-to-face, but you will be able to reach customer support by chat or over the phone.
2. Online lending platforms
Online lending platforms are similar to online lenders, but may have different ways of funding the borrowers’ loans. Rather than funding the loan directly, online lending platforms might connect loan investors with borrowers and help service the loans by speaking with borrowers and collecting payments. Or, alternatively, the platform might fund the loan directly, and then sell it and get reimbursed.
3. Credit unions
Credit unions are not-for-profit financial institutions. Unlike traditional lenders, you’ll need to qualify and join a credit union before you can take out a loan.
Eligibility may be limited to people who work or live in a certain area. But other credit unions are open to almost anyone, as long as they give a small donation to a partner charity.
Credit unions may offer some of the best low-interest personal loans. However, smaller credit unions may have less robust online services than online-only lenders. You may also need to visit a branch to complete the loan application.
Banks may also offer personal loans in their branches and through their websites. Some larger banks even create entirely separate divisions to offer personal loans online.
If you have a checking or savings account already established with a bank, it may be convenient getting a personal loan from them as well, as the funds may be more quickly added to your account.
You want to make sure you’re getting the best deal possible when you take out a loan.
Secured or unsecured?
Many personal loans are unsecured loans, meaning you don’t need to put up collateral to get the loan. However, some lenders offer secured personal loans—often by keeping the collateral for the loan locked in a savings account until you pay off the debt.
Secured loans can be easier to qualify for and may offer lower interest rates. However, if you don’t have the collateral or want to lock up your savings, an unsecured loan may be the better option.
Interest rate and APR
Personal loans generally have a fixed interest rate, and your loan’s rate can impact your total cost of borrowing. However, loans’ annual percentage rates (APRs) tell you the annual cost of borrowing the money, inclusive of certain fees—such as an origination fee. All else being equal, the loan with the lowest APR may be the best personal loan.
Lenders may charge a variety of fees, including upfront and ongoing fees. These can vary significantly from one lender to the next, which is why it’s important to shop around and compare your offers.
The most common fees to watch out for are upfront fees, which may be called origination, administration, or processing fees. These are often a percentage of your loan amount, but some lenders charge a flat fee instead of a percentage. Either way, the lender may deduct the fee from your loan’s disbursement or add it to the total loan amount.
There may also be activity-based fees, such as late fees. But some lenders, like LendingClub Bank, also offer a fee-free grace period for payments.
Prepayment penalties aren’t common on personal loans. However, if you’re using a personal loan as a debt consolidation loan, check to see if the debts you’re consolidating have prepayment fees or penalties.
Personal loans are installment loans you repay over a predetermined period of time. Having several options to choose from can be important because your loan’s term length can influence your interest rate and monthly payment.
Longer repayment terms often have lower payments but higher interest rates—meaning it could cost you more over the life of the loan. Shorter repayment terms can lead to paying less interest, but you’ll likely have a higher monthly loan payment.
Also, consider how frequently you need to make payments. Monthly payments are common, but some lenders may require weekly or biweekly payments.
Maximum loan amount
Lenders often have minimum and maximum loan amounts. Maximum limits could be important when you need to borrow a large amount of money for a specific purpose, such as consolidating other debts or making a large purchase.
Your loan offer may be for less than the lender’s maximum loan amount, and it can depend on your credit, income, and other outstanding debts. Still, you want to make sure that you’ll at least have the potential to borrow as much money as you need.
Your eligibility for a loan can depend on a lender’s requirements and preferences. For example, you may need to live in a state where the lender operates.
Eligibility can also depend on your credit history, credit score, debt-to-income (DTI) ratio, and history with the lender. The specific requirements aren’t always shared with applicants, and they may depend on one another. For example, someone with excellent credit might not need as low of a DTI as someone with fair credit.
One of the best ways to check your eligibility and offers is to see if the lender lets you get a pre-qualification offer with a soft inquiry—which doesn’t impact your credit score.
Some lenders require you to take out a loan on your own. Others let you apply with a cosigner or co-borrower.
Adding someone who has good credit and a high income to your loan can be helpful if you’re having trouble qualifying on your own, or if you want to get a loan with more favorable terms.
Make sure you discuss the arrangement in detail ahead of time. As a joint applicant, the other person will be legally responsible for repaying the loan, and it can impact their credit.
Loan funding time
With many personal loans, you’ll receive the funds within a few business days of loan approval. However, read over the requirements to see how long the entire process might take and what you can do to speed it along.
If you need to connect a bank account, send in proof of income, or verify your identity, make sure you have everything ready when you start the process.
Good customer service during and after the loan application process can be important as well.
It can be difficult to assess customer service, but you can start by reading reviews of the lender. If you have questions, you can also contact the lender to see how (and how quickly) they respond.
Finding the best personal loan starts with looking at your specific situation and then shopping for loan offers.
1. Have a plan for your loan.
Before taking out a loan, nail down your loan purpose, how much you want to borrow, and your ideal monthly payment based on your personal budget.
For example, if you’re planning on refinancing credit card debt, add up all your current balances to figure out how much you want to borrow. (You may need to borrow slightly more if an origination fee will be taken out of the loan disbursement.)
Knowing how much you can afford each month can also be important. While a loan with a longer repayment term might not offer the best rates, it could still be the best loan for you if it’s what works for your budget.
2. Research potential lenders.
Look over lenders’ offerings to make sure the basic eligibility requirements and loan amounts are in line with your needs.
Lenders will often advertise an APR range on their website. However, personal loan interest rates can depend on a variety of factors. Don’t assume the lender with the lowest potential APR is the one that will offer you the lowest rates.
3. Get quotes from multiple lenders.
To find out which loans may be best for you, try to get loan offers from several lenders. Often, you can do this with a soft credit inquiry—meaning the lender will review your credit report, but the credit check won’t impact your credit scores.
4. Compare APRs, fees, and discounts.
A low interest rate might be good, but comparing your loan options and offers’ APRs may be the smarter move. Unlike the interest rate, the APR will tell you the annual cost of the loan, inclusive of its origination or funding fees.
You may also want to take a closer look at the fees. For example, if you think you’ll likely be able to repay the loan early, it might make financial sense to opt for the loan with the lowest upfront fee—even if it doesn’t have the lowest APR.
Some lenders may also offer an autopay discount for your loan’s interest rate. The discount may be included in the quoted interest rate and APR, so make sure you consider this when comparing loan offers.
Whether you’re looking for a home improvement loan or want to refinance higher-rate debts, an unsecured personal loan can offer competitive rates and fast funding. However, if you want to get the best loan, you’ll need to consider your personal finances and check your offers from multiple lenders.
1. What are the best personal loans?
The best personal loan will be a loan that meets your needs in terms of eligibility, funding time, loan amount, and repayment plan. All those being equal, the loan offer with the lowest APR may be your best option.
2. What is a good interest rate on a personal loan?
Interest rates can vary depending on the lender, loan amount, repayment period, and the applicant’s financial situation. According to the US Federal Reserve, the average interest rate on a 24-month personal loan was 9.39% during the third quarter of 2021.
3. What are the requirements for a personal loan?
Personal loan requirements can vary by lender. Beyond basic eligibility requirements, such as living in a state where the lender operates, your credit score, and debt-to-income ratio can impact your personal loan offers and rates.