Most banks offer personal loans, but credit unions and online lenders often have better rates

Nearly every bank with a branch near you offers personal loans. The catch: banks typically require good credit (usually 670 or higher), and their rates reflect that. If your credit is weaker, a credit union or online lender may approve you at a lower rate than a traditional bank would. Online lenders move fastest — some fund loans in one business day — while banks and credit unions usually take three to five business days after approval.

The real difference is not whether a lender offers personal loans, but what rate they will give you and how quickly they move. A bank you already use may offer you a better rate because they can see your account history. A credit union may offer a lower rate if you are a member. An online lender may approve you when a bank would decline. Shopping across all three categories usually saves you money.

Key Takeaways

  • Traditional banks offer personal loans to borrowers with good credit, but their rates are often higher than credit unions or online lenders charge.
  • Credit unions typically offer lower rates than banks, but you must be a member and membership requirements vary by location and employer.
  • Online lenders fund loans fastest and often approve borrowers with fair or poor credit, though their rates can be high if your credit score is low.
  • Your existing bank relationship, credit score, and how quickly you need the money should all factor into which type of lender you choose.
  • Comparing rates across at least three lenders takes 15 to 30 minutes and can save you hundreds of dollars over the life of the loan.

Traditional banks and what to expect from them

Banks like Chase, Bank of America, Wells Fargo, and regional banks in your area all offer personal loans. Most require a credit score of 670 or higher, though some will go lower. Banks typically offer fixed rates between 6% and 36%, depending on your credit score and the loan term you choose. The better your credit, the lower your rate.

The advantage of borrowing from your own bank is that they already know your account history. If you have kept a healthy balance, paid bills on time, and banked there for years, they may offer you a rate better than their standard offer. You can also walk into a branch and speak to someone face-to-face, which some people prefer. The disadvantage is that banks move slowly — approval usually takes three to five business days, and funding another one to two days after that.

Banks also tend to have stricter income requirements. Many want to see that your monthly debt payments (including the new loan) will not exceed 40% to 50% of your gross monthly income. If you are self-employed or have irregular income, a bank may ask for more documentation than an online lender would.

Credit unions: lower rates if you are a member

Credit unions are nonprofit organizations owned by their members, and they typically offer lower rates than banks do. A credit union personal loan might carry a rate of 4% to 24%, depending on your credit and the loan term. The catch is that you have to be a member, and membership rules vary widely.

Some credit unions are open to anyone who lives or works in a certain area. Others are restricted to employees of a specific company, members of a profession, or people who belong to a particular organization. If you are a teacher, nurse, military member, or work for a large employer, there is often a credit union you can join. You can search for credit unions you may be able to join at CO-OP, a network that lets credit union members use each other's ATMs and branches.

Credit unions also move faster than banks in many cases — some fund loans within one to two business days. They tend to be more flexible about income documentation and credit scores, especially if you have been a member for a while. The downside is that credit unions have smaller loan limits than banks do, and fewer branches if you need in-person service.

Online lenders: fastest funding and more flexible credit requirements

Online lenders like LendingClub, Upstart, Prosper, and SoFi offer personal loans entirely through their websites. They fund loans fastest — many can deposit money into your account within one business day of approval, and some within hours. They also approve borrowers with fair or poor credit (scores as low as 300 in some cases), though your rate will be higher if your credit is weaker.

Online lenders typically charge between 6% and 36%, but the rate you receive depends heavily on your credit score and income. They use alternative data — like your payment history with utilities or rent — to assess risk if your credit file is thin. They also tend to have lower income requirements than banks do, and they are more forgiving about self-employment income or irregular earnings.

The trade-off is that online lenders have less flexibility once you have signed. You cannot walk into a branch to discuss a problem, and customer service is usually by phone or email. Some online lenders also charge origination fees (a percentage of the loan amount, typically 1% to 8%) that are deducted from what you receive. Always read the full disclosure before you commit.

How to compare rates across lenders

Most lenders let you check your rate without a hard credit inquiry — meaning they will show you an estimate without damaging your credit score. Start by checking your own bank's website, then visit two or three credit unions you might join, then get quotes from two or three online lenders. This takes 15 to 30 minutes and gives you a real picture of what you will pay.

When you compare, look at the total interest you will pay over the life of the loan, not just the interest rate. A 10% rate on a five-year loan costs more in total dollars than a 12% rate on a three-year loan. Most lenders show you the total interest in their disclosure documents. Also check whether there are origination fees, prepayment penalties (a fee if you pay off the loan early), or late fees. These add up.

Once you have narrowed it down to your top choice, you can allow a hard credit inquiry. This will temporarily lower your credit score by a few points, but multiple inquiries from lenders within 14 to 45 days (depending on the credit scoring model) usually count as a single inquiry. So shop within a short window to minimize the impact.

Banks that specialize in personal loans

Some banks focus specifically on personal lending and have streamlined their approval process. LendingTree, Earnin, and MoneyLion are platforms that connect you to multiple lenders at once, though they are not lenders themselves. Marcus by Goldman Sachs and Ally Bank are online banks that offer personal loans with no origination fees, which can save you money upfront.

These specialized lenders often approve faster than traditional banks and have clearer pricing — no hidden fees or surprise charges. They are worth checking if you want a middle ground between a traditional bank and a marketplace lender. Marcus, for example, offers rates from 6.99% to 19.99% and funds within one to two business days.

What happens after you are approved

Once a lender approves you, they will send you loan documents to sign electronically or in person. Read these carefully — they spell out the interest rate, fees, payment schedule, and any penalties. After you sign, the lender will fund the loan by depositing money into your bank account or sending a check. This usually happens within one to five business days, depending on the lender.

Your first payment is typically due 30 days after funding. Some lenders let you choose your payment date so it aligns with your paycheck. If you miss a payment, most lenders charge a late fee (usually $15 to $35) and may report it to the credit bureaus, which will hurt your credit score. Some lenders offer a grace period of a few days, but do not count on it — set up automatic payments if you can.

Frequently Asked Questions

Can I get a personal loan with bad credit?

Yes, but your rate will be higher. Online lenders and some credit unions will work with credit scores below 600, though rates may be 25% to 36%. Traditional banks usually will not. If your credit is very poor, consider a credit-builder loan from a credit union instead — it is designed to help you rebuild credit while you borrow.

Do I need to have a bank account with a lender to get a loan from them?

No. Most lenders will fund a loan to any bank account in your name, even if you bank elsewhere. Some online lenders require direct deposit for verification purposes, but this is not the same as requiring you to switch banks. You can keep your existing bank and borrow from a different lender.

What is the difference between a personal loan and a line of credit?

A personal loan gives you a lump sum upfront that you repay in fixed monthly payments. A line of credit works like a credit card — you draw money as you need it and pay interest only on what you use. Lines of credit are less common from banks but more common from online lenders. They are useful if you do not need all the money at once.

How long does it take to get approved for a personal loan?

Online lenders can approve you in minutes to hours. Banks and credit unions usually take one to three business days. Funding (getting the money) typically takes another one to five business days. If you need money urgently, an online lender is your fastest option.

Will getting a personal loan hurt my credit score?

A hard credit inquiry will lower your score by a few points temporarily. Once you have the loan, your score may dip slightly at first because you now have more debt. But making on-time payments will rebuild your score over time, and having a mix of credit types (installment loans plus credit cards) actually helps your score in the long run.