Select Page

Your Guide to the Best Personal Loans of the Year

Personal loans remain to be one of the most popular kind of loans as there is no designated use for the funds obtained from this kind of loan. The application is relatively simpler because a business or any other entity is not involved with the process.

As this does not require any form of collateral, you place your assets at no risk due to its nature. Moreover, this short-term loan only needs your signature (a personal guarantee) for you to receive your funds given.

The interest rate varies, depending on your credit score. Thus, like in all kinds of loans, you are more likely to land a better deal with great credit rating and financial history.

While there is no specification on where one can use the funds, borrowers usually apply for personal loans to consolidate and settle high-interest credit card debts, to pay medical debts, or even to start a business venture.


Traditional Banks vs Online lenders

There are two main sources for this: traditional banks as well as online and peer-to-peer loans. Traditional banks, as in its name, are where people have come accustomed to when in need of making any banking transactions, including loans.

Online lenders, on the other hand, have emerged as a response to borrowers’ needs that have gone unfulfilled by your traditional brick-and-mortar institutions.

Falling under the second type, peer-to-peer lenders are not lenders, in the strictest sense of the word. Instead, they consolidate potential creditor candidates that best fit your needs and qualifications. They serve as a middle man as you make the payments to them instead of directly to their partner company.

What are the differences between traditional banks and online lenders?

In looking for best personal loans, you must first understand the nature of its source. Between these two basic choices for loans, there are differences that you should take note of.

Credit Rating Threshold

In essence, credit rating threshold is the risk associated with your credit rating that your creditor can tolerate. In this factor, traditional banks and online lenders are on polar opposites.

Since the 2008 financial crisis, traditional banks have been stricter with their requirements for taking out a loan. Especially for unsecured loans like personal loans, you must have excellent credit rating and financial history, and a steady stream of income.

The same goes for credit unions, entities that operate like a bank but are owned by its customers. However, while you need not necessarily have an excellent credit rating, their threshold remains relatively stringent.

For online lenders, however, their lending policies are very relaxed. For example, in some of these companies, you only need a credit score of 500 to qualify. Still, the best personal loan rates that will be made available to you are based on this.

Application Processing and Funding Time

Lending officers in traditional banks look very closely on your submitted requirements and assess what they deem to be the “fair” rate for you is.

Having a lot of potential borrowers lining out their doors, it takes them a while to go through your application. The same goes for your funding time. With banks, it usually takes weeks from the time you have submitted your application to the receiving of funds.

For online lenders, the time it takes to have your application approved and to obtain the money from the loan is significantly shorter. Everything is done online, and most of them promise their decision within 24 hours.


Here, what rises between the two depends on your definition of accessible. Others find some sense of comfort knowing that whatever the issues are, it can be addresses face to face. In this context, bank branches win.

However, accessibility can be interpreted as something beyond physical nearness. Say, you have found the best personal loan rates. However, you do not have the time to visit a bank because you are juggling two jobs.

In this case, online lenders are more accessible. You can submit your application anytime and anywhere, and still receive the results within a set amount of time.

Are online lenders beating banks at their own game?

Based on the three differences we have highlighted above; online lenders obviously have advantages over traditional banks. Not only can they process loan requests at a quicker rate, their risk appetite also caters to borrowers of a wide range of credit scores as well.

In terms of services, online lenders have a lot more to offer. Peer-to-peer lenders, particularly, offer a service that banks do not. They connect borrowers to multiple potential lenders, allowing you to find the best rates for personal loans.

In this respect, we would only examine online lending sites because of the different innovative and unique mechanisms they employ that benefits borrowers the most.

LendingTree: Explore and exhaust all your personal loan options

Instead of visiting multiple sites and suffer from total information overload, LendingTree simplifies this for you. What it does is let you access multiple P2P (peer-to-peer) lenders in just one site. Thus, it is technically not a P2P lender itself.

After submitting your loan request, this site will consolidate offers from its partner lenders. From your options you can choose the best place to get a personal loan. Information about each offer such as the annual percentage rate (APR), the maturity of the loan, as well as the amount you need for the monthly payment are also presented.

It must be noted that LendingTree does not mediate in your transaction with your chosen creditor. Therefore, you may have to provide additional information aside from the ones you have already submitted.

Aside from their main service, one of their most notable features include tracking your credit score for free through their account and their customized calculators for different types of loans including personal loans. All these, you can do either through their website or through their iOS and Android app.

Upstart: Best for building your credit history

Lenders deem potential borrowers too risky for having little to no credit history. If you are going to start a business, even with a solid business plan, you may find it hard to take out a loan. Even if you find a creditor to award you a loan, the deal you will get will definitely be far from the best rates for personal loans.

This is what sets Upstart apart from the competition. Their risk appetite is very different in the sense that they do not just look at your FICO score. They also consider your education, your work history, and what you studied in school.

On average, their three-year loan has a 17% APR, having monthly payments of $28 for every $1,000 borrowed. Once an applicant is accepted, he will also get the funds the next business day.

Given their considerations when it comes to deciding on whether to approve or reject, it is great for people with good education but have no credit history.

Lending Club: A true market for borrowers and lenders (peer-to-peer lending)

One of the most attractive benefits of peer-to-peer lending is the promise of offering the best of both worlds: lenders benefit from higher returns on their money while borrowers enjoy lower interest rates

Peer-to-peer lending is a new financial service model that uses online marketplaces to help lenders and borrowers come together. The lenders benefit from higher returns from their investments and the borrowers can benefit from lower interest rates and quicker access to funds.

The customer service is nothing short of stellar as well. Guiding both ends of the transaction, Lending Club offers a dedicated advisor who can help in you making the best financial decisions. Moreover, their eligibility requirements are not as strict compared to other lenders having the same offer.

SoFi: Best place to get personal loans with low fees

While many peer-to-peer lenders can boast low interest rates, they do still get their piece of cake by charging many fees such as processing fees, origination fees, and loan fees. If you are looking to void or at least minimize these fees, SoFi is the best place to get a personal loan.

Like Upstart, they do not just look at your FICO score. In determining whether or not you qualify for a certain interest rate, they look at your education and employment history. For you to get qualified for the loan, you need to meet stricter requirements.

SoFi looks favorably at potential borrowers who graduated from a Title IV accredited university who are currently employed as well. Meeting these requirements, you may be deemed entitled to some waived fees. For other fees that they charge, these are comparably lower against the current industry standards.

For these reasons, more particularly with the fees in consideration, SoFi is one of the best personal loans available today.

How do I apply for an online personal loan?

On your way to getting the best personal loan available, you would not need to go through many troubles as you usually do with a traditional bank. The process is much more simplified and streamlined, allowing you to get the funds within a week.


1. Know your priorities

Before looking at your options, ask yourself, “What matters to you the most?” Are you after the best personal loan rates? Perhaps you simply want to build your credit history. No matter your priority, the important thing is that you know it.

2. Evaluate your options

From there, you can assess which lender fits your needs best. If you want to further simplify the process, you can go to LendingTree which consolidates all the loan offers for you.

However, chances are you will get a better deal applying for a personal loan directly. Depending on your set priority, go to the designated online P2P lenders.

3. Submit your application

The initial application takes only minutes to complete. Here, you will be asked to provide basic information such as current address, Social Security number, estimated credit rating, employment status, and some income information.

After the initial phase, you may be asked to provide proof of the information you have given. This may include proof of income and address. Your credit rating will be verified through the three major credit reporting agencies as well through a “soft credit check”.

All their actions will not have any effect on your current credit rating. Still, from there, lenders can already deduce whether or not you will be a good candidate for a personal loan.

4. Transact with your chosen lender

If you have submitted your personal loan application with mortgage brokers like LendingTree, you will submit further documentation to your chosen lender. These mortgage brokers only collect the most basic information (as mentioned in the third step), but everything else will be done with the specific lender you decide to work with.

What are the factors that influence your interest rate?

The reason why we did not include a category of best personal loan interest rates is it is very volatile. Most lenders offer borrowers a wide range of it depending on risk appetite and qualifications respectively.

While they may have different requirements in applying for a loan, what remains the same is that they all at your credit rating. It is supposed to determine whether or not you are a dependable payer. However, to allow people to build their credit, your payment history with other regular bills such as rent and mobile collection can be reviewed in replacement of the credit rating.

Holding other things constant, having a good credit can almost guarantee you a great interest rate. On the other side of the fence, if your rating is less than stellar, expect higher interest rates if not a loan application rejection.

Your income is also considered when applying for a personal loan. Here, it is not simply a matter of how much you make, but also of how regularly you receive money. Most lenders have minimum income requirements, but this can be adjusted depending on your debt-to-income ratio.

What are loan fees you need to look out for?

Interest rate

Even a few percentage points off your interest rate can save you a lot in your monthly payments, especially for personal loans that last for a couple of years. Knowing this, you would want to get the best personal loan rates possible.

Origination fee

Origination fee can range from 1 to 6 percent, which is deducted from your loan balance. This is not charged by all lenders, but this can make a big difference on your balance.

For example, your origination fee is set at 5% at a $20,000 loan. Thus, what you get will only be $19,000.

Check-processing fee

Today, check payments are usually charged by most lenders. If you plan to use this medium to settle your debt, pay attention to the fees associated with check processing.

What are personal loans for?

Personal loans are usually unsecured and amount to a few thousand dollars. Because it is unsecured, some lenders may find it too risky to lend you money. In this case, you may need a cosigner to qualify for the loan.

With the usual maturity of personal loans lasting at least a year, the uses of several loans are more than for a short-term solution for a temporary restricted cash flow or budget mismanagement. Here are some of the most common uses for personal loans:

1. Debt Consolidation

Compared to credit cards, the interest rates for personal loans are lower. Thus, it makes sense that instead of continuing to pay month after month of compounded interests, you would take out a loan with better rates to settle your credit card balance.

2. Home repairs

When your home needs repairs, a personal loan can provide you with substantial funds to finance these repairs.

3. Leisure purposes

If you have proposed and want to give your partner the wedding of their dreams, a personal loan can make this into a reality. The same goes if you want to go on a grand vacation to de-stress.

How Are Personal Loans Funded?

As you already know through reading about our best lenders from each category, personal loans can be funded by non-bank entities. Individuals now may choose to fund a loan through various mediators such as Lending Club and Prosper. Here, the investors gain interest from their money, while borrowers get the opportunity to close a low interest rate deal.

What are your rights as a customer?

The obligation of lenders does not end once money is given to the borrower. Aside from the obvious responsibility of financing they offer, they are also legally obligated to provide certain protections.

If you find the loan process to be too confusing, your creditors must be able to answer your queries. They must also be able to give you total information, regardless of your knowledge on its relevance.

Below are your consumer rights, along with questions that they are legally obligated to answer.  For more extensive information about this matter, you can visit the Federal Trade Commission (FTC) website to access helpful resources on consumer information.

Your consumer rights include but are not limited to the following:

1. Their decision on whether or not to grant you a loan cannot be based on your color, race, gender, national origin, and other identifiers such as political affiliation. However, it can be based on your financial status as verified by your tax returns and other proof. If you believe you have been discriminated against, you may contact the office of your state’s attorney general to report the incident

2. If the bank branch or the main office of your creditor is in a non-community property state, you may choose not to disclose your marital status.

3. Your receiving public assistance can never be used against you by creditors.

4. After submitting all the required documents, you should be notified within 30 days whether you have been accepted or rejected.

You also have the right to ask the following:

1. In the event that you have been denied a loan request, you can demand an explanation. Perhaps there are some information in your credit report you are not aware that have let you be viewed as ‘too risky’. You can even have the decision reversed if their reason behind their decision is incorrect. Whether their decision is reversible or not, you can still obtain a free copy of your credit report.

2. If approved, you can take a closer look at what you are signing up for. This includes inquiring about the total cost of the loan, along with interests and fees. If you deem the arrangement to be not in your best interests, you can decide not to pursue the loan.

3. If there are any legal terms that you do not understand, you can request that they clarify them. It is important that you understand everything a legal agreement contains before signing it.

How do I detect loan scams?

Say, you find a low interest with manageable payment terms. This is definitely the best place to get a personal loan, right? Not necessarily.

Loan scams are very real, and offer such as what we mentioned is too good to be true especially with bad credit. Here are some signs that you should look at for:

1. Unsolicited loan offers

2. Lenders uninterested in your credit history

3. Lenders demanding upfront payment to receive loan funds.

While there are legitimate agencies that provide loans to people with bad credit, still be wary because most lending institutions do not. Thus, you must always be cautious before transaction. To be safe always verify if the lender is registered in your state. For loan brokers always verify with the bank.


Getting the best personal loans available in the market is not attainable for everyone, but because of P2P lenders catering to different customer pain points, most people can get a good deal.

Scammers still exist, so you must remain vigilant. Truer today more than ever, there are numerous legitimate options, both online and bank, where you can avail of loan products.