Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It may not have been previewed, commissioned or otherwise endorsed by any of our network partners.
Updated on Thursday, December 13, 2018
If you need cash to make a big purchase or to pay down debt, a personal loan can quickly deliver the funds you need — possibly with a fixed term and interest rate, as well.
You can use a personal loan for a variety of purposes, such as to:
- Consolidate your debt
- Manage a large expense, such as moving or planning a wedding
- Cover unexpected costs, such as medical or legal bills
Personal loans are popular with consumers seeking access to cash. In the fourth quarter of last year, 4.6 million personal loans were issued, the highest levels since 2015, according to a study by credit reporting agency TransUnion. Consumers are borrowing larger amounts as well, with the average unsecured loan hitting $7,986 in Q1 2018, up about $300 from a year before.
While one popular financial company, Capital One, no longer offers unsecured personal loans, many banks, credit unions and online lenders still do. However, the terms can vary depending on the lender and your financial position.
If you’re in need of a personal loan, consider the following options.
Alternatives to Capital One personal loans
Consumer have many options for a personal loan. Many banks and credit unions offer personal loans, as do online lenders such as SoFi, LendingClub and Earnest. Here’s what you need to know about the different kinds of lenders you may encounter on your search for a personal loan.
Personal loans from online lenders
As more consumers get comfortable with e-commerce and online lending, the online banking sector has burgeoned into a fast-growing marketplace.
Online lenders offer consumers the convenience of browsing for loans and obtaining rate quotes on their own schedule. No more scheduling appointments with loan officers at banks and listening to their pitches. With sophisticated apps and websites, online lenders make it easy to apply for a personal loan and submit necessary documents.
While some consumers may worry about entering personal information online and uploading pay stubs and bank accounts, reputable online lenders offer strong web security. To get more comfortable with an online lender, consumers can look for reviews online and also search with the Better Business Bureau or states’ attorney’s offices. Also, online lenders are subject to the same federal oversight as traditional lenders, which should give consumers some added confidence.
Personal loans from traditional banks
Banks with physical branches could be a good option for borrowers. If you aren’t comfortable applying online for a loan, for example, you could go in to your local branch and speak with a representative about your options.
There could be advantages to applying for a loan with a bank that you already do business with, too. Banks may offer incentives to their banking customers seeking personal loans, such as preferential rates if you enroll in autopay, are an existing customer or have a checking or savings account. However, this perk isn’t exclusive to banks with brick-and-mortar locations — though it could be a selling point.
You may be able to use your existing savings account as collateral for a secured personal loan, which could offer better terms than a traditional personal loan. Perhaps the biggest advantage of taking out a loan at your local branch, though, is having someone to work with in-person. You could make payments in person and have a go-to banking rep to answer your questions. That’s something online lenders can’t offer. (Though a credit union can.)
It’s worthing noting that some banks, such as US Bank, will only extend personal loans to existing banking customers.
Here are terms you may find from lenders in MagnifyMoney’s personal loan marketplace:
- Rates: You can find rates as low as 3.49%.
- Term length: Personal loan terms range from 12 to 60 months.
- Borrowing limits: Borrow from $2,000 to $100,000.
Personal loans from credit unions
Another popular option is to get a personal loan from a credit union. These are nonprofit financial cooperatives whose members own the institution.
Credit unions typically charge lower fees and offer higher savings rates than for-profit banks. You may also find personal loans with lower interest rates. But to take advantage, you’ll need to be a member with an existing account.
Credit unions may be more willing than other lenders to extend a loan to someone with a lower credit score.
With a personal loan from a credit union, members can usually choose between a secured loan and an unsecured loan. Some credit unions get creative with what they’ll accept for collateral. For instance, the Credit Union of Denver allows members to secure loans with vehicles such as ATVs, dirt bikes, jet skis, or titled trailers, including horse trailers or flatbed trailers.
Here are terms you may find from lenders in MagnifyMoney’s personal loan marketplace:
- Rates: You can find APRs as low as 3.49%.
- Term length: Personal loan terms range from 12 to 84 months.
- Borrowing limits: Borrow up to $50,000.
How to compare personal loans
When you’re shopping for personal loans, consider taking these steps:
- Check your credit report and report errors. Your credit report informs your credit score, which plays an important role in securing favorable rates and terms, as well which lenders you may be able to work with.
- Shop around with lenders. Even if you’d prefer a brick-and-mortar bank, consider online lenders that may offers better terms. You may find the perks of a traditional bank aren’t worth a higher loan cost.
- Get a breakdown of a lender’s fees. Ask about origination fees, charges for late or missed payments and penalties for early repayment.
Before tying down a lender, you should compare rates by getting pre-approved with different lenders. That way, you can make an informed decision before taking out loan funds. Here are some of the most common variables with a personal loan to compare:
APR: Short for annual percentage rate, this rate indicates how much a loan will cost you per year. It includes your interest rate and any associated fees from your lender. Your rate can be fixed or variable.
Term length: The period of time your loan must be repaid, including the interest. Personal loan terms typically run between one year and seven years.
Conditions: Personal loans can be secured loans, meaning they are guaranteed by hard assets or a bank account, such as a certificate of deposit (CD) or savings account, or unsecured loans, which are not tied to any collateral.
Borrowing limits: The amount of money you can receive from your personal loan. Different lenders may have different minimum and maximum borrowing amounts.
3 alternatives to personal loans
Sometimes, a personal loan isn’t the right fit for a consumer. Perhaps your credit score is low and that means you don’t qualify for an attractive interest rate. Or maybe the terms of the personal loans are too restrictive for your needs and budget. The good news is there are other forms of credit and ways to get you quick access to cash.
Personal line of credit
Along with personal loans, many banks and credit unions will extend their banking customers a personal line of credit.
- You have to access to a pre-approved line of credit you can draw on when you need it.
- Payments based on funds you access, not the full amount you qualify for.
- You don’t need collateral because the line is tied to an existing bank account.
- For an even lower interest rate, you can secure the loan with a bank account or CD.
- When your draw period ends, you must repay the loan in full.
- Rates and terms vary by lender, so shop around for your best deal.
- It can take several days to get access to funds.
Intro 0% APR balance transfer credit card
Some credit card companies offer attractive introductory offers with 0% APR for a fixed period of time, usually 12 to 21 months. You can check out different options on MagnifyMoney’s credit card marketplace.
- You get a grace period to pay off your balance without incurring interest payments.
- Like a no-fee loan, these cards allow you to make purchases on credit while earning perks or rewards.
- As long as you pay on time, you’ll avoid any interest charges or late fees.
- Many cards come with no annual fee.
- Once the introductory period ends, interest rates can skyrocket.
- If you don’t pay on time and pay off the balance, you could face stiff fees and interest charges.
- If you have weak or low credit, you may not qualify.
Home equity line of credit (HELOC)
If you own a property and you’ve paid down a sizable chunk of your mortgage, you may be able to tap into some of your equity in your home. Many lenders and mortgage companies offer home equity loans, or HELOCs.
- HELOCs function similarly to a bank line of credit, but in this case, your equity in your property guarantees the loan.
- During the draw period, make minimum monthly payments of both principal and interest.
- Option to pay for major expenses, such as home renovations, vacations or other large purchases, or pay down debt.
- Interest rates are generally lower than credit cards.
- When you reach the end of your draw term, you have to keep repaying loan, but no longer have access to funds.
- Interest rates are often variable, which can add to your costs if rates go up.
- Some banks may offer fixed rates for some or all of your balance, but that rate could be higher than the variable rate.
While Capital One no longer offers personal loans, they do still offer credit cards, savings and checking accounts and auto loans. For personal loans, consumers can inquire with many other traditional and online lenders.
Since personal loans are a popular offering, there should be plenty of competitive offers on the marketplace, providing borrowers with the greatest chances to find a personal loan that meets their financial capabilities and their needs.