The main sources are banks, credit unions, and online lenders — each with different speed, rates, and requirements

Personal loans come from three broad categories of lenders, and where you borrow from shapes how fast you get money, what interest rate you pay, and what paperwork you need. Banks are slowest but often cheapest if you have good credit. Credit unions are faster and more flexible on credit scores, but you have to be a member. Online lenders move fastest — sometimes funding in one business day — but charge higher rates. The lender you choose depends on your credit score, how quickly you need the money, and whether you belong to a credit union.

Your credit score is the single biggest factor. If your score is 700 or above, traditional banks and credit unions will offer you the lowest rates. If your score is below 650, online lenders and credit unions are more likely to work with you, though you will pay more in interest. No lender will tell you whether they will lend to you until you apply, but you can get a sense of your odds by checking your credit report first — it is free once a year at annualcreditreport.com.

Key Takeaways

  • Banks offer the lowest interest rates but take one to two weeks to fund and require strong credit or an existing account relationship.
  • Credit unions fund faster (often three to five business days) and accept lower credit scores, but you must be a member.
  • Online lenders fund in one to three business days and work with poor credit, but charge significantly higher interest rates.
  • Your credit score, income, and debt-to-income ratio determine which lenders will work with you and what rate you will receive.
  • Comparing offers from multiple lenders takes the same time as applying to one, because most lenders do a soft credit check first.

Banks: lowest rates, slowest funding

Traditional banks — Chase, Bank of America, Wells Fargo, your local community bank — offer personal loans at the lowest interest rates if you have good credit and an existing account. Rates typically range from 6% to 36% depending on your credit score and the loan term. The application process is straightforward: you go to the bank's website or visit a branch, fill out an application, and provide proof of income (usually a recent pay stub or tax return).

Funding takes one to two weeks because banks verify everything manually. If you already have a checking or savings account at the bank, the process is faster — they already know your account history and can move quicker. If you do not have an account, you will need to provide more documentation. Banks pull a hard credit inquiry, which temporarily lowers your credit score by a few points.

Banks are the right choice if you have a credit score above 700, do not need money urgently, and want the lowest possible interest rate. They are not the right choice if you need money within days or if your credit score is below 650.

Credit unions: faster approval, more flexible on credit

Credit unions are member-owned financial institutions that often have looser lending standards than banks. You can join a credit union through your employer, your industry, your location, or sometimes by opening a savings account with a small deposit (often $5 to $25). Once you are a member, you can borrow within days. Rates are typically 6% to 36%, similar to banks, but credit unions often lend to people with credit scores as low as 600.

The application process is usually faster than banks because credit unions have fewer layers of approval. Many credit unions let you apply online or by phone, and some will give you a decision the same day. Funding typically happens within three to five business days. Credit unions also tend to be more willing to work with you if your income is irregular or if you have recent negative marks on your credit report.

To find a credit union you can join, use the CO-OP Network locator or the Credit Union Locator on the Credit Union National Association website. Search by your employer, your zip code, or your profession. If you are not sure whether you are may be able to access for any credit union, call one and ask — membership rules vary widely.

Online lenders: fastest funding, highest rates

Online lenders — LendingClub, Prosper, Upstart, Best Egg, and dozens of others — fund loans in one to three business days and work with credit scores as low as 580. The tradeoff is interest rates: you will typically pay 8% to 36%, and rates at the high end are common for people with poor credit. Online lenders also charge origination fees (usually 1% to 8% of the loan amount), which are deducted from what you receive.

The application is entirely online and takes 10 to 15 minutes. Most online lenders do a soft credit check first, which does not lower your score. If you pass that initial screen, they do a hard credit check and verify your income using tax returns or bank statements. Funding goes directly to your bank account, not to you as a check.

Online lenders are the right choice if you need money within days, have a credit score below 650, or do not have a relationship with a bank or credit union. They are not the right choice if you have good credit and can wait, because you will pay significantly more in interest than a bank or credit union would charge.

What lenders ask for and what it costs to apply

Every lender will ask for proof of income, your Social Security number, your date of birth, and your address. Proof of income is usually a recent pay stub, a tax return from the last two years, or a bank statement showing regular deposits. Self-employed people should bring two years of tax returns. If you are retired or on disability, bring statements from Social Security or your pension.

Applying does not cost anything upfront. Banks and credit unions do not charge application fees. Online lenders sometimes charge an origination fee, but that is deducted from the loan amount — you do not pay it out of pocket. For example, if you borrow $5,000 and the origination fee is 5%, you receive $4,750 and owe back $5,000 plus interest.

A hard credit inquiry (the kind that lowers your score) stays on your report for one year, but the impact on your score fades after a few months. If you are shopping around, do all your applications within two weeks — credit bureaus treat multiple inquiries in a short window as a single inquiry, so your score takes one hit instead of many.

Comparing offers and choosing the right lender

Before you commit to any lender, get offers from at least two or three. The interest rate you are offered depends on your credit score, income, and how much you want to borrow, so the rate one lender quotes you may be different from what another quotes. Comparing takes the same amount of time as applying to one lender, because most lenders do a soft credit check first and can give you a rate estimate without a hard inquiry.

When you compare, look at the total interest you will pay over the life of the loan, not just the interest rate. A $10,000 loan at 8% over five years costs $2,197 in interest. The same loan at 20% costs $5,737. Use an online loan calculator to see the difference. Also check whether the lender charges a prepayment penalty — most do not, but some do, and that matters if you plan to pay off the loan early.

Once you have chosen a lender and accepted an offer, you will sign documents electronically or in person. Read the promissory note carefully — it states the interest rate, the monthly payment, the loan term, and any fees. If anything does not match what the lender quoted you, ask before you sign.

What to do if you are turned down

If a bank or online lender turns you down, it is usually because your credit score is too low, your income is too low, or your debt-to-income ratio is too high (meaning you already owe too much relative to what you earn). You have a few options. You can apply to a credit union, which has more flexible standards. You can wait three to six months, pay down existing debt, and try again — your credit score will improve and your debt-to-income ratio will improve.

You can also look for a co-signer: someone with better credit who agrees to repay the loan if you do not. A co-signer does not put up money upfront, but they are legally responsible for the debt. Some online lenders accept co-signers; most banks and credit unions do. Be aware that if you default, the co-signer's credit will be damaged too.

Avoid payday lenders and title lenders. These charge interest rates of 400% or more, trap borrowers in cycles of debt, and are illegal in many states. If you are in a financial emergency, contact 211 (dial 2-1-1 or visit 211.org) to find local emergency assistance programs instead.

Frequently Asked Questions

How much can I borrow?

Most personal loans range from $1,000 to $50,000. Banks and credit unions typically lend up to $50,000 or more if you have good credit and income. Online lenders usually cap at $35,000 to $40,000. The amount you can borrow depends on your income and credit score — lenders want to see that you earn enough to repay the loan.

What is the difference between a personal loan and a credit card?

A personal loan gives you a lump sum upfront that you repay in fixed monthly payments over a set period (usually two to seven years). A credit card is a line of credit you can use repeatedly, and you pay interest only on what you use. Personal loans have lower interest rates but less flexibility. Credit cards are better for ongoing expenses; personal loans are better for one-time needs.

Can I get a personal loan with bad credit?

Yes, but you will pay higher interest rates. Credit unions and online lenders work with credit scores as low as 580 to 600. Rates for bad credit typically start around 25% and go up from there. A co-signer with better credit can help you get approved and lower your rate.

How long does it take to get the money?

Banks take one to two weeks. Credit unions take three to five business days. Online lenders take one to three business days. Some online lenders offer same-day or next-day funding, but that is rare and usually comes with higher fees or rates.

What happens if I cannot make a payment?

Contact your lender immediately and explain your situation. Many lenders will work with you on a temporary payment reduction or deferment. If you miss payments, the lender will report it to the credit bureaus, your credit score will drop, and the lender may eventually sue you or send your account to a collection agency. Missing payments also damages your ability to borrow in the future.