We’ve been reviewing personal loans for seven years, and for our most recent update we looked at 15 of the most popular online lenders. We looked at traditional lenders and peer-to-peer lenders, which have become popular in recent years because they can give you access to loans without going through traditional banks.
We looked for lenders with simple applications that could be processed and approved quickly. These loans are unsecured, meaning they do not require any collateral. Personal loans are often used to pay off credit cards, medical debt, home improvements or to fund new businesses.
Best for Multiple Loan Choices
Best for Multiple Loan Choices: LendingTree
LendingTree isn’t a private loan provider or a P2P lending site, but it can connect you with many different lenders and is a great clearinghouse for finding loan rates and information.
When you submit a loan request on its website, LendingTree consolidates offers from multiple online lenders and lets you pick the best one. You can evaluate the APR you’ll be paying on your loan, the length of the loan term and how much your monthly payment will be.
Best if You Have Little or No Credit History
Best if You Have Little or No Credit History: Upstart
Upstart is a lender that looks at more than just your FICO score and how long you have had credit. It also takes into account your education, what subject you studied in school and your work history. Since it began, Upstart has funded over 57,000 loans and will fund loans up to $50,000. For those with a limited credit history but who have a good education and earning potential, Upstart may be a great loan option.
Best Peer-to-Peer Lending
Best Peer-to-Peer Lending: Lending Club
Lending Club is the best P2P lender we reviewed. It has less stringent eligibility requirements when compared to other lenders. Lending Club offers business loans and personal loans. To be eligible for a personal loan you’ll need to meet Lending Club’s income and credit requirements. Business loans require your business meet sales requirements and have been active for at least 12 months. This peer-to-peer lender also offers a dedicated advisor.
Best for Low Fees
Best for Low Fees: SoFi
SoFi has the lowest fees we saw, but it has stricter eligibility requirements than many of the other lenders we reviewed. SoFi looks at your credit, employment and education history to determine if you qualify for one of its loans. You must currently be employed to qualify for a loan from this lender, and you must have graduated from a Title IV accredited university that meets SoFi’s requirements. If you do qualify, however, the company doesn’t charge many of the fees that other lenders do, and the fees it charges are lower than the other lenders we reviewed.
Applying for a personal loan online in many cases is simple. The initial application process may only take a few minutes. Information varies from lender to lender, but you'll most likely be asked to provide your address, employment status, estimated credit rating, Social Security number and income information.
You may also be asked to provide further supporting documentation such as proof of income and your address. This basic information helps the lender or broker determine whether you are a good candidate for a loan. Your credit will also be verified using the three major credit-reporting agencies. Many lenders run what is called a "soft credit check” that will not negatively affect your credit score.
Many online personal loan services, such as LendingTree, are not actual lenders. LendingTree says it is a marketing lead generator and a duly licensed mortgage broker, not a lender. The company obtains your basic information and then connects you with potential lenders you might acquire a loan from. Your loan will be through the specific lender you ultimately decide to work with, not the online company you initially applied through.
As with most loans, your credit rating is scrutinized. Each lender has its own requirements, but you're more likely to obtain a personal loan if you have good credit and a dependable, steady income. If you have not established credit through traditional lines, such as credit cards, a mortgage or auto loans, the lender may consider your payment history with other bills such as utilities or rent.
Interest rates can vary greatly. If you have good credit, you can likely obtain a competitive rate. If your credit is bad or marginal, you can expect to pay a much higher rate, or you may not receive an offer at all.
Lenders may also evaluate your income. Many have minimum income requirements, and these vary from lender to lender, but usually the requirement is a few thousand dollars per month, depending on the loan size and your debt-to-income ratio.
Loan Fees to Consider
The first fee to consider is the actual interest rate. Rates vary greatly. Just a few percentage points in the long run can make a huge difference, so you'll want to shop for the best rate possible.
A second loan expense to consider is origination fees. Not all loan companies charge this fee. The origination fee is taken from the loan balance. For example, if you get a $10,000 loan but the lender charges an origination fee, your initial deposit won’t be the full $10,000 because the origination fee has been taken out.
The last fee is a check-processing fee. Most companies nowadays add an extra charge to process check payments.
There are several differences between personal and payday loans. Consumers also may have different purposes in mind when seeking a loan. Credit requirements may vary as well.
These types of loans are usually in the thousands, are repaid over a few years, and take into account your credit rating and history. Consumers seek out personal loans to fund expenses that a traditional loan may not cover. They use personal loans to consolidate debt, including credit card and medical debt; to fund a new business venture or as a small business loan; or to cover home repairs. Some even use loans to fund events such as a wedding or vacation. To the lender, your ability to repay the loan is more important than what you plan to use the loan for.
Personal loans are often unsecured and require no collateral. Loan seekers with marginal credit may be able to obtain this type of loan with the help of a cosigner.
These loans are usually small, short term and available to those with high-risk or marginal credit. They are called payday loans because, originally, the loan term lasted only till the borrower’s next payday. Consumers turn to these loans to pay for unexpected emergencies or to cover living expenses. They should be a last resort since they come with burdensome fees
What We Evaluated, What We Found
For our reviews, while we didn't obtain a loan through each service, we did evaluate the application process, customer support and repayment options. Most services provide simple-to-use online applications. We contacted customer support representatives by email and telephone.
For the most part, we had positive experiences with each loan service's customer support staff. Most took their time with us to thoroughly answer our questions, and response times were within an acceptable range. We didn't find too much variance with repayment options except that some loan services charge an additional fee for processing check payments.
Some of the services on our lineup work with multiple lenders, and we can’t review every lender out there. We also could not compare rates and terms. Rates vary greatly depending on your income, credit rating, location, state regulations and more. Your experience will be unique, and we suggest that you carefully consider each service and the terms of the loan before signing.
How Are Personal Loans Funded?
Not all online personal loan services are bank funded. Some are funded by individual investors. Lending Club and Prosper offer investment opportunities to individuals who want to fund loans, portions of loans or loan portfolios. Typically, investors are repaid the amount they loaned plus interest. This is not the same as peer-to-peer lending, but rather, it's an investment for individuals with capital. Prosper investors have funded over $6 billion in loans.
Your Rights as a Consumer
Lenders are legally obligated to provide consumers certain protections. Legal documents are often confusing and the loan process can be overwhelming. Perhaps you are unsure what questions to ask. Below is a list of your consumer rights and the questions you are entitled to ask. This isn't a complete list. The Federal Trade Commission (FTC) website offers some helpful resources in the consumer information section of its website.
Some of your rights include the following:
Credit decisions cannot be based on your race, color, gender, national origin or other such identifiers. Credit decisions can, however, be based on your financial status. If you feel you have been unlawfully discriminated against, contact your state attorney general's office.
You do not have to reveal your marital status if you are applying for a loan in a non-community property state.
Creditors are not allowed to discriminate if you receive public assistance.
Within 30 days of applying for a loan, you should receive notification whether you've been accepted or rejected.
You have the right to ask for the following:
If you are denied your loan request, ask why. There may be information on your credit report you may not be aware of, or there may be incorrect information. You also have the right to obtain a free copy of your credit report.
Inquire about the total cost of the loan, including interest, fees and other charges. While a low monthly payment may seem attractive, you may discover, on closer analysis, that it is not in your best interests. For example, some lenders charge fees for processing check payments.
Request clarification on any terms or legal language you do not understand. Do not sign any type of legal agreement if you do not fully understand the terms.
Avoiding Personal Loan Scams
Loan scams are real, and you should be wary of offers that seem too good to be true. The FTC and other consumer-rights groups regularly warn consumers about loan scams. Here's how you can protect yourself:
Always be suspicious of unsolicited loan offers. If you receive a phone call or mail you didn't request, you should be careful.
Be wary of lenders that are not interested in your credit history. All legitimate lenders and banks will evaluate your credit history.
Verify that the lender you are considering is registered in your state.
Do not send any money to a lender that asks you to make a payment upfront before you've received your loan funds. Legitimate lenders will not ask you to do that.
If you're using a loan broker, always verify the bank or institution. Do your research. Physical locations, P.O. boxes, etc., should be thoroughly investigated.
If you have bad credit and are seeking a personal loan, you'll need to be extra cautious. That said, there are numerous legitimate lending agencies available to help those with marginal credit. In addition, each state provides free resources to those desiring to improve their credit. In many states, it is the Consumer Credit Counseling Service that can assist you.