Taking out a personal loan can be a way to deal with unexpected expenses, emergencies, or help you consolidate your debt. Whether it’s a small personal loan for $10,000 or a substantially larger loan – where you get the loan can significantly change how much the loan ends up costing you. In addition, especially when emergencies have already put you in a tough spot, the customer service you receive regarding your loan can make or break your experience.
Continue reading to discover whether credit union or banks are best for personal loans.
Getting a personal loan from an online lender
In the age of the internet, heading online is often the first step people take when shopping for something. Loans are no different. Online lenders operate entirely over the internet, meaning that every step can be completed from the comfort of your own home. Nowadays, though, most local lenders have an online option too, so this convenience could be available to you regardless of what type of financial institution you choose.
Many online lenders use a non-traditional methodology to determine your credit-worthiness. So, instead of just relying on your FICO credit score, some use other factors to weigh whether you should be approved for a loan. For example, Upstart, an online lender, uses artificial intelligence to quantify your risk as a borrower.
Many online lenders feature a very fast funding process. If your personal loan is for an emergency, this can make a big difference.
Online lenders are one of the most popular categories of lenders for personal loans. As the loan process is competitive for lenders, newer online companies have had to find ways to beat the competition. This means that you can find an array of loans with great perks for a variety of credit scores to fit your needs.
Getting a personal loan from a bank
While several major banks offer personal loans, many of the very popular banks do not. In general, large banks tend to have a pretty traditional loan approval process, and you’ll likely need a fairly high credit score to get approved. If you are a member of a larger bank, however, this can get you access to higher loan amounts and better APR.
In contrast to online lenders who have very little physical infrastructure like branches and offices, operating expenses at banks may mean the APR of these loans is higher.
As a benefit, banks can offer excellent customer service. If you are already banking at one of these institutions and you are happy with their customer service, this might be the best place to start.
Getting a personal loan from a local credit union
Credit unions operate differently from banks. Credit unions are institutions owned by the members, so they exist to provide the best rates and savings to their members. They are not-for-profit and serve a local area to aid the finances of that community.
Because of this, your local credit union, especially if you are already a member, may be the best place to get a personal loan. Becoming a member typically costs only a small amount, so even if you are not a member, you still may benefit from joining to access better loan rates.
Because credit unions exist to serve their members, they may offer better rates to people with lower credit scores along with more flexible loan conditions.
Depending on the size of your credit union, the application process might be different. Many credit unions, like Jeanne D’Arc, provide an easy online application, but others may still require you to apply in-person. Local credit unions are tailored to the community they serve, so customer service can be quick and friendly.
Finding the best lender for you
The best lender is the one that fits your needs. Regardless of whether you are getting a mortgage, car loan, or personal loan, the best way to get a good deal on a loan is to shop around.
Exploring the options at all three places – online, at a bank, and at a credit union can ensure you end up with the best deal for you. Once you have several institutions on your list, you can apply to be pre-approved. The pre-approval process will help you compare loans once you’re provided with the exact terms and amounts. Pre-approval is non-binding, so you can apply for pre-approval with several lenders.