Our Recommended Top 10 Loan Companies
Here’s our selection of the top personal loan lenders organized according to what they do best, from which you can choose the right one for you:
- Best personal loan companies overall: SoFi, Marcus, and LendingTree
- Best personal loans for good credit: Marcus
- Best personal loans for fair credit: LendingClub, Even Financial, and LendingPoint
- Best personal loans for young professionals: SoFi
- Best online lending marketplace: LendingTree
- Best lender for a small loan: Marcus
- Best loan for covering large debts: Upgrade
- Best for large range of loan amounts: GuideToLenders
- Best personal loan for debt consolidation: Credible and Personal Loan Pro
What is a Personal Loan and Should You Get One?
A personal loan is an amount of money loaned to an individual typically without any collateral. Though they used to be seen as a solution for people in dire financial straits, today the options and terms are better than ever and more and more everyday people are taking out personal loans.
A personal loan, also sometimes referred to as a signature loan or an unsecured loan, can be a great idea if you have outstanding credit debt and a less than stellar credit score. If you use the personal loan to pay off the credit card, you can improve your credit score and then pay off the personal loan, which will almost certainly have an easier interest rate than the credit card.
Even if you don’t have credit debt, taking out a personal loan and repaying it is a good way to establish positive credit, which will help you down the road when you apply for a car or house loan.
If you have multiple outstanding debts – or just one – at a high interest rate that’s taking a real bite out of your paycheck each month, then a personal loan could really help out. Find a lender that can give you a personal loan with a friendlier interest rate, and then use that to pay off the other debts.
A personal loan can help you pay for home renovations, which can significantly improve the value of your home. This can really pay off if you’re looking to sell the house in the near future, or if you’d like to increase the value of your home in order to borrow against the equity.
Things don’t always go as planned, and sometimes we need a little extra help. A personal loan can help you handle unexpected medical bills, home repairs following a flood or a fire, or a sudden expense like a funeral. When hard times come, having some financial peace of mind can make things a little bit easier, and that’s no small thing.
What to Know Before Applying For a Personal Loan
What’s my credit score?
Your credit score is calculated based on your loan repayment history, credit card usage, and other financial markers that can give lenders a rough guide of how responsible you are with money and how much of a default risk you are. No matter what your credit score is, you will be able to find a lender that will offer you a loan.
Typically, the higher your credit score the more likely you will be to receive loans. Also, because with high credit you are considered less of a risk, your interest rates will tend to be lower.
That doesn’t mean that less than great credit is a deal-breaker, but it’s good to know what the numbers mean:
|Credit score rating||Credit score range||Average APR for market|
|Excellent||720 – 850||10.94%|
|Good||690 – 719||14.56%|
|Average||630 – 689||19.84%|
|Bad||580 – 629||28.64%|
|Poor||579 and below||Most lenders will not lend|
Having no debt history is not a good thing when it comes to your credit score. Most of the leading personal loan companies like to see that you’ve had debts in the past and that you’ve made your payments, and can be trusted to do so again.
What if I have bad credit?
Many lenders can provide loans even if you have bad credit, though you will face tougher interest rates and less leeway with the loan amount and repayment terms.
Typically anything under 630 is considered a bad credit rating, and even when people in this range do get loans, they tend to have a 28.64% APR on average. If you have collateral to put up, this can help you secure better terms despite a low credit rating.
In addition, many lenders allow cosigned loans. These are loans where someone with better credit co-signs the loan with you. While this is a way for you to get a loan that you’d be shut out from otherwise, there are some caveats. Mainly, the person who cosigned for the loan is on the hook too so if you default on the payment, it could wreck their credit as well as your own.
How do interest rates work?
The interest rate is how much the lender charges a borrower for a loan. It is expressed as a percentage of the amount borrowed. For example, if you take out a loan for $10,000 with an interest rate of 5%, you’ll end up paying $10,500 over time. If you get an interest rate of 10% though, you’ll be paying $11,000. If you’re consolidating debt and the interest rate is still lower than your earlier loan, then you’re in good shape. If not, you need to examine if the interest rate makes the loan worthwhile for you.
The interest rate is going to be one of the most important things to look at when considering a personal loan. It adds a significant amount to the overall repayment terms, and even just one percentage point here or there can make a big difference
What affects interest rates?
Variable vs fixed rate loan – With a variable rate loan, the interest rate can fluctuate as the market changes, and typically has lower interest rates than a fixed loan, which stays at the same rate throughout the repayment of the loan.
The length of the repayment – The longer the repayment term the more interest you will pay over the lifetime of the loan. If you can keep up with a higher monthly payment over a er period of time, then you can find loan terms that will save you money on interest. It’s crucial though that you first look at your monthly budget and determine how big of a loan you can stay ahead of, so you don’t dip further into debt paying off the new loan.
Your credit score – The better your credit the better the interest rate. Lenders will also look at your past financial history to look for any delinquent loans, foreclosures, bankruptcies, and other red lights that could make you a high-risk borrower before they determine the interest to assign you. Your income – or lack thereof – will always be a central factor in determining your interest rate.
What is an APR?
APR is an acronym for annual percentage rate. It combines the charges, fees, and payments to tell you the grand total of what your loan will cost you per year. The lower the APR, the less you are going to pay in the long run.
The APR calculation on personal loans will vary depending on your lender, but it will typically be lower than what you would receive from a payday or short-term loan – usually starting at 10% and capping at 35.99%. It is not ideal to owe any money, but if you require a loan, then a personal loan could certainly be a viable option.
APR rates mentioned include associated fees.
Full repayment for the loans displayed range between 60 days to 180 months.
Representative example: assuming a loan of $10,000 over 60 months at a fixed rate of 3.1% per annum and fees of $60.00. This would result in a representative rate of 3.3% APR, with monthly repayments of $180.80, for a total amount paid of $10,848.00.
How much can I get approved for?
There isn’t a clear right or wrong answer to this question – it all depends on your needs, your income and your abilities. If you’re trying to consolidate debt, your loan should be the same or larger than the outstanding loans you’re covering, and if you need to cover an expense like medical bills or home renovations, then it should meet your needs, so you don’t have to go through the hassle or expense of securing another loan.
At the same time, you need to make sure that the payments aren’t too heavy for you to keep up with. After all, there’s no sense taking out a loan to cover another debt, only to find yourself unable to keep up with the payments on the new loan.
What loan term should I take?
This is a pretty simple calculation, but what works for you can be anything but simple. If you decide to go for a lender that offers short term loans you will have higher monthly payments but will pay less interest over the life of the loan. If you spread it out over a longer loan term, your monthly payments will be lower, but the overall interest you pay will be higher.
Paying more interest isn’t a bad idea if it means that you can lock down a monthly payment that you know you can make.
The Types of Personal Loans
Unsecured vs. secured loans
The main difference between an unsecured and secured loan is that an unsecured one doesn’t require you to put up any collateral. That’s the good news. The bad news is that because the loan is “unsecured” (no collateral), the lender is taking a bigger risk on you, and typically will assign you a higher interest rate. Lenders will also give you a lower ceiling on the loan, as well as a shorter repayment term.
These loans typically appeal to borrowers who don’t have assets like a car or a house, but still want some financial assistance.
A secured loan requires the borrower to put up some form of collateral. While it’s more risky for you in that you have to put up an asset that the bank can seize if you default on the debt, you stand to enjoy an easier interest rate, a higher borrowing ceiling, and a longer repayment period.
Peer-to-Peer lending has become a major industry in recent years, and provides all types of opportunities for borrowers who may have had less options in the past. Often called “social lending” or “crowd lending,” P2P sidesteps the banks and connects borrowers and lenders directly with one another online. It’s a solid option if you have less than great credit or lack assets to put down as collateral. That said, there are some costs, including origination fees which can range from 0.5% to 5% of the loan. Late fees can also be expensive if you don’t make your payments on time. In addition, as unsecured loans, the interest rates tend to be around 15% or so.
Fixed rate vs. variable rate loans
With a fixed rate loan the interest rate stays constant throughout the life of the loan, which will help you budget every month and stay on top of your payments. With variable rate loans, the interest rate fluctuates in accordance with the market. You may get a lower initial rate than you would with a fixed rate loan, but because the market can be unpredictable, it can be harder to know for certain what your future payments will be.
Lines of credit
These are loans that are given as a line of credit that you can use for any purpose. They are typically unsecured, so the interest rates tend to be high, though not as high as a credit card. Also, these loans give you the freedom to draw from the credit line as needed, so you only owe what you spend.
These are sometimes called character loans or good faith loans. This is an unsecured loan that only requires you to put down your signature. Because there is no collateral and the lender is taking a risk, these loans come with higher interest.
Cash advances and balance transfers
A cash advance is taken against the credit line on your credit card, and typically comes with fees in addition to the interest on repaying the money. With a credit card balance transfer you move the money you owe on one card to another credit card with a lower interest rate. This typically includes a fee.
This is just a term to refer to a loan that is repaid over a set period of time with set payments. A mortgage and a car loan are good examples of installment loans.
The Top 3 Personal Loan Companies
Personal loans are changing the lives of millions of people every day, opening new windows of opportunity and financial relief where none existed before. Now that you know the basics of this fundamental financial resource, you are ready for a comparison of the leading loan providers. Here are some of the best names in the industry for securing a personal loan for yourself.
- Loan amount: $5,000 to $100,000
- APR: 5.95% to 14.74%
- Loan term: 36-84 months
SoFi stands for Social Finance and it began by helping students drowning in debt get loans. The institution has since expanded, offering mortgages, personal loans to pay off expenses—such as credit card debt—and wealth management services.
Visit the unabridged SoFi review to learn more about this top notch loan company.
- Loan amount: $1,000-$35,000
- APR: 4.7%-35.99%
- Loan term: 3-180 months
LendingTree doesn’t directly lend money, rather, it’s a marketplace that brings together reliable lenders who compete for your business by offering the best rates possible. Potential borrowers fill out a pre-approval form for Lending Tree, which then sends them a list of lenders that fit their needs. As a borrower, you can choose the lender with the most beneficial loan terms.
Visit the full LendingTree review to learn more.
3. Lending Club
- Loan amount: $1,000-$40,000
- APR: 5.99%-35.89%
- Loan term: 36-60 months
Lending Club is a customer-focused, award-winning peer lending system, devoted to helping customers receive low interest loans. Run completely online, Lending Club facilitates personal and business loans from third parties, and the loans can be used for anything from debt consolidation to home improvement.
Visit the extended LendingClub review to learn more about this top loan provider.
Applying for a Personal Loan
The best online lenders usually have an easier loan application process than banks:
- Stage 1: This generally consists of an online questionnaire where you are asked to provide information including the amount of the loan, the purpose of the loan, and your personal information. You will also probably be asked to provide your income level and housing status.
- Stage 2: This involves a soft credit pull, which won’t affect your credit rating like a hard credit pull. Based on the credit score and other details you provided the lender, they will determine how much to loan you and under what terms and interest rate.
- Stage 3: Once your application has been pre-approved, most online lenders will then put you directly in touch with the lender, and you will finish applying directly with them. You should have all relevant paperwork on hand and ready to send, including your driver’s license or passport, proof of residence (utility bills, rent contract, etc), and pay stubs from your place of work.
Types of Lenders
This is a company that directly loans money to borrowers and doesn’t merely facilitate lending between lenders and borrowers.
These are companies that don’t lend out money themselves, rather, they facilitate loans between borrowers and lenders, by creating an online marketplace where borrowers can apply to all types of lenders at the same time, typically with one simple application.
These are private lenders who are not part of a bank or other financial institution. These are private individuals who loan money, and often with interest rates and other terms that are not as good as those with more established lenders.
Peer-to-peer (P2P) lenders refers to private lenders and borrowers which are connected to one another online. P2P lending is a way for lenders to invest some money in small-scale loans, typically spread out across a large number of borrowers in order to offset the default risk. For borrowers without collateral who have less than ideal credit, these can be a great option, despite the origination fees and often high interest rates.
This is the most traditional, tried-and-tested way to attain a loan. That said, banks tend to be more cautious, and if you’re credit isn’t in good shape, or you don’t have any collateral, you might have real trouble finding a loan through a bank.
Applying for a Loan With a Cosigner
Most of the best lenders allow cosigner loans – including LendingClub, LightStream, and Freedom Plus, among others. Find one that allows co signers with your level of credit, and get an idea of what type of fees or other terms they require, and then look for a cosigner.
True, money and loved ones don’t always mix, but sometimes you have to count on the people close to you for help. Your cosigner will have to be someone with better credit than you, but also ideally, with some good collateral to put up. If the person has a spotless financial record, it could really help you get a loan with good terms. That said, you need to keep in mind that if you default, it will also affect the financial record of your cosigner. Make sure it’s someone who won’t hold this over you, and who you can work with to pay off the debt.
How to Choose a Lender
Shop around: compare several top lenders
This may go without saying, but don’t settle on the first lender you find. Make sure to cast a wide net and really invest your time in your search for a leading loan company. If the terms the company is offering you aren’t to your liking, feel free to look elsewhere and remember – you’re the customer, they’re looking for your business, and are likely to try to meet you in the middle.
Trustworthiness and Legitimacy
Does the lender have a good reputation? Do you find a high number of complaints online? What about customer service, are they responsive? Make sure to take a long look at the company’s pedigree to see how long they’ve been in business and whether or not they’ve built a good reputation with their clients.
The fees and charges
The cost of your loan isn’t merely a matter of the interest or how much you took out – there are also often origination fees at the start of the loan, as well as late fees, processing fees, and the like. Make sure that the fees are not going to be too much of a burden, and add it to your list of considerations.
In order to choose the best personal loan provider for you, you must first determine what your needs are as a borrower, compare lenders and then see which one can fulfit those needs at the best rate possible.
Some of the key criteria that you should check when comparing loan providers are:
- Maximum Loan Amount: Some online loan providers offer loans up to $20,000, while others will offer loans as high as $100,000.
- APR: Different lenders will give you differing APRs so it’s important to find rates that you know you will be able to keep up with.
- Loan Term: These vary from months to years, so it is advisable to check with your lender when your loan must be paid off.
- Qualifications: Some lenders will require you to have an excellent credit score in order to get a loan, while others will be more forgiving. You may be required to provide proof of employment or income as well. It is advisable not to waste your time applying for a loan before you check the lender’s basic requirements.
- Simplicity and Speed: A major advantage that online lenders have over banks is that they generally cut out a lot of the bureaucracy from the process. This means an easier and quicker process for the borrower. Some lenders can transfer funds to you in as a little as a few days.
* LightStream Terms and Conditions:
APR Disclosure: Your APR may differ based on loan purpose, amount, term, and your credit profile. Rate is quoted with AutoPay discount, which is only available when you select AutoPay prior to loan funding. Rates under the invoicing option are 0.50% higher. Subject to credit approval. Conditions and limitations apply. Advertised rates and terms are subject to change without notice.
Payment Example: Monthly payments for a $10,000 loan at 4.99% APR with a term of 3 years would result in 36 monthly payments of $299.66.
Same-Day Funding Disclosure: You can fund your loan today if today is a banking business day, your application is approved, and you complete the following steps by 2:30 p.m. Eastern time: (1) review and electronically sign your loan agreement; (2) provide us with your funding preferences and relevant banking information; and (3) complete the final verification process.
** Marcus By Goldman Sachs® Offer Terms and Conditions:
Your loan terms are not guaranteed and are subject to our verification of your identity and credit information. To obtain a loan, you must submit additional documentation including an application that may affect your credit score. Rates will vary based on many factors, such as your creditworthiness (for example, credit score and credit history) and the length of your loan (for example, rates for 36 month loans are generally lower than rates for 72 month loans). Your maximum loan amount may vary depending on your loan purpose, income and creditworthiness. Your verifiable income must support your ability to repay your loan. Marcus by Goldman Sachs is a brand of Goldman Sachs Bank USA and all loans are issued by Goldman Sachs Bank USA, Salt Lake City Branch. Applications are subject to additional terms and conditions.