Local banks, credit unions, and online lenders are the three main places to find personal loans, and each has different requirements and speed.

Your local bank is often the first place to check because you may already have a relationship there, which can make approval faster. Credit unions typically offer lower rates than banks if you're a member, though membership usually requires living or working in a specific area or belonging to a particular group. Online lenders operate nationwide and approve many people banks would turn down, but they move fastest and have the least paperwork if you already know your credit score and income.

The choice between them depends on your credit history, how quickly you need the money, and whether you want to work with someone face-to-face or handle everything online. A person with excellent credit might get the best rate from a credit union. Someone with fair credit and an urgent need might find an online lender faster. Someone who prefers talking to a real person should start at their bank.

Key Takeaways

  • Local banks offer personal loans to existing customers faster than to new applicants, and rates depend on your credit score and income.
  • Credit unions charge lower rates than banks on average, but you must be a member, which usually requires living in a service area or working for a specific employer.
  • Online lenders approve decisions in one to three business days and work with people who have fair or poor credit, but rates are higher than traditional lenders.
  • Peer-to-peer lending platforms connect borrowers directly to investors and may work if banks and credit unions have rejected you, though approval is not may provide.
  • Comparing offers from at least three lenders takes about an hour and can save you hundreds of dollars in interest over the life of the loan.

Getting a personal loan from your bank

If you have a checking or savings account at a bank, start there. Banks already have your financial history on file, which speeds up approval. They typically require a credit score of 620 or higher, though some require 650 or better for their best rates. You'll need to provide recent pay stubs, tax returns from the past two years, and a photo ID.

Bank loans usually take five to seven business days from application to funding, though some banks offer faster approval for existing customers. Interest rates vary widely based on your credit score, income, and the loan amount. Banks publish their rates publicly, so you can call or visit their website to see what range you might may have access to for without affecting your credit score.

The downside is that banks are stricter about credit history than online lenders. If you've had late payments, collections, or a bankruptcy in the past five years, your bank may decline you or offer a much higher rate. In that case, a credit union or online lender may be your next option.

Joining a credit union and borrowing

Credit unions are nonprofit organizations that lend to members at lower rates than banks, typically 2 to 5 percentage points lower depending on your credit score. The catch is that you must be a member, and membership rules vary by credit union. Some require you to live in a specific county or state. Others require you to work for a particular employer, belong to a union, or be related to a current member.

To find a credit union you can join, visit CO-OP or Alliant Credit Union's website and search by your zip code or employer. Membership is usually free or costs a small one-time fee (often $5 to $25). Once you're a member, you can borrow within a few days. Credit unions also tend to be more flexible with people who have fair credit or a recent financial setback, because they focus on member benefit rather than profit.

Credit union loans typically require the same documents as banks: recent pay stubs, tax returns, and ID. The application process is usually simpler and faster than at a bank because credit unions have fewer layers of approval. If you may have access to for membership at a credit union, it's worth comparing their rates to your bank's before deciding.

Applying for a personal loan online

Online lenders approve personal loans in one to three business days and fund them within one to five business days after that. They work with people who have credit scores as low as 580 and are more forgiving of past financial problems. The trade-off is that interest rates are higher than banks or credit unions—often 10 to 36 percent depending on your credit score and income.

To apply online, you'll need your Social Security number, recent pay stubs or tax returns, and your bank account information. The lender will pull your credit report, which temporarily lowers your score by a few points. Most online lenders let you check your rate without a hard credit pull first, so you can see what you might may have access to for before committing to an application.

Online lenders vary widely in reputation and terms. Before applying, read recent customer reviews on sites like Trustpilot or the Better Business Bureau. Check whether the lender is licensed in your state (some states restrict certain types of lending). Avoid any lender that asks for payment upfront or guarantees approval—those are red flags for scams.

Peer-to-peer lending as an alternative

Peer-to-peer (P2P) lending platforms like Prosper and LendingClub connect borrowers directly to individual investors. They work similarly to online lenders—you apply online, get approved in a few days, and receive funding within a week. Interest rates fall between online lenders and banks, typically 6 to 36 percent depending on your credit score.

P2P lending can work if traditional lenders have turned you down, because the platforms focus on your overall financial picture rather than just your credit score. However, approval is not may provide, and if your application is declined, you won't know why. The platforms also charge origination fees (usually 1 to 8 percent of the loan amount), which are deducted from your funds before you receive them.

P2P lending is slower than online lenders because the platform must find investors willing to fund your loan. This can take two to four weeks. If you need money urgently, an online lender is faster. If you have time and want to avoid the highest interest rates, P2P lending is worth exploring.

Comparing offers from multiple lenders

Never accept the first offer you receive. Comparing rates from at least three lenders takes about an hour and can save you hundreds or thousands of dollars over the life of the loan. When you compare, look at the interest rate, origination fee, and total amount you'll pay back, not just the monthly payment.

Most lenders let you check your rate without a hard credit pull, which doesn't affect your score. Once you've narrowed your choices to two or three, you can apply formally. Multiple hard credit pulls within 14 days usually count as a single inquiry for scoring purposes, so applying to several lenders in a short window won't hurt your score as much as applying over several weeks.

Create a simple spreadsheet listing the loan amount, interest rate, origination fee, loan term (usually 24 to 84 months), monthly payment, and total interest paid for each offer. This makes it easy to see which lender gives you the best deal. Don't choose based on the lowest monthly payment alone—a longer loan term means lower payments but more total interest.

What to watch out for when borrowing locally

Payday lenders and title loan shops operate in most neighborhoods and advertise fast cash with no credit check. Avoid them. These lenders charge interest rates of 400 percent or higher and are designed to trap borrowers in a cycle of debt. A personal loan from any of the sources above is cheaper and safer, even if approval takes longer.

Be cautious of lenders who contact you unsolicited by phone or email offering pre-approved loans. Legitimate lenders don't cold-call borrowers. These are often scams designed to steal your personal information or charge upfront fees. Always initiate contact with a lender yourself by visiting their website or going to a physical location.

Read the full loan agreement before signing. Look for prepayment penalties (fees if you pay off the loan early), variable interest rates (rates that can increase over time), and balloon payments (a large lump sum due at the end). Most personal loans have fixed rates and no prepayment penalties, but some do, and you need to know before you commit.

Frequently Asked Questions

Can I get a personal loan with bad credit?

Yes. Online lenders work with credit scores as low as 580, and some peer-to-peer platforms may consider you even lower. Credit unions are also more flexible with past credit problems than banks. Expect higher interest rates—often 25 to 36 percent—but you have options. Avoid payday lenders, which charge far more.

How fast can I get the money?

Online lenders fund within one to five business days after approval. Banks take five to seven business days. Credit unions typically fund within three to five business days. Peer-to-peer lending takes two to four weeks because the platform must find investors. If you need money urgently, an online lender is fastest.

What if I don't have recent pay stubs?

Most lenders accept tax returns from the past two years as proof of income. Self-employed borrowers can provide business tax returns or bank statements showing deposits. Some online lenders accept bank statements alone. Call the lender before applying to confirm what documents they'll accept for your situation.

Does applying for a personal loan hurt my credit score?

A hard credit pull lowers your score by a few points temporarily, usually recovering within a few months. Multiple hard pulls within 14 days typically count as one inquiry. Checking your rate without a hard pull doesn't affect your score at all. The impact is small compared to the benefit of comparing offers.

Should I borrow from a friend or family member instead?

Personal loans from friends or family can damage relationships if repayment becomes difficult. A formal loan from a lender protects both parties by setting clear terms in writing. If you do borrow from someone you know, put the agreement in writing, including the amount, interest rate (if any), and repayment schedule.