You have options when looking for credit and personal loans. Yet, if you’re looking for convenience, you can go through an online lender or bank. There are multiple reasons why this is not only convenient but could be the best deal out there.
Data from Bankrate helps to push this notion even further, where it goes on to say that the range for most personal loans ranges from $2,000 all the way up to $25,000. Banks love this range and have developed the necessary product to cater to this growing demand.
Banks have mastered the interest rate
Banks control what they set for interest rates, allowing them to be as competitive as possible. This was seen even during the brunt of the COVID-19 pandemic, where the interest rates were already low, but banks wanted to compete even further, as people were staying at home. Some banks, such as U.S. Bank, cut their rates down to 2.99%. Other banks were quick to follow and compete.
John Davis, a financial education analyst with ScoreSense, stated, “When looking for a personal loan, make sure to check your options and look for a great deal, but definitely look at banks. Look at aggregate sites that let you quickly look up possibilities with multiple lenders. You’ll see the average rates while shopping or the best terms.”
Cody Zucker of We Buy Jersey Shore Houses LLC, based in Belmar, New Jersey, added, “Personal loans are an excellent option, and the market is competitive. We can even use these personal loans for professional reasons that help us with our real estate business. Then we take those loans with new credit cards offering 0% and work to consolidate.”
He did have to say this, though. “It won’t be like this forever and will probably not be so hot in just a few years as rates go up.”
What are some of the pros and cons of Personal Bank Loans?
Even though personal loans can be a great option for unsecured debts there are some pros and cons to consider.
George Birrell who is a CPA who founded TaxHub based in Edgewater, New York said, “Banks may be a good place to get a personal loan but do note that it really depends on the person who is borrowing the funds.”
Birrell added, “If the relationship with the bank is already built, the overall interest rates are decent, and you have a solid credit score, then yes, a bank is a great option. There’s also the possibility of more benefits from an existing relationship.”
Pros
Minimal queries. – When it comes to personal loans, you may have to select an option for the reason for the loan, but you really can use the funds for anything you want, even business related.
Saves money long term – You will have fixed payments and set monthly terms and won’t have to use revolving debt such as credit cards, or worse, go into a negative bank balance.
Low rates – While rates have gone up, they’ll still be better than credit cards, and banks still will offer promotional and competitive rates.
*Low rates. Interest rates are at a historic low and banks are competing to provide the best rates to personal loan borrowers.
Cons
Your credit score is a critical component because most loans come unsecured. While other online lenders may be more lenient in this part, banks are looking at borrowers with healthy credit scores around the 700 score mark. Anything below that will come with higher rates and terms.
Watch out for fees: This is a staple with banks. You may get several thousand dollars for your loan, but that may come with a price of around a few hundred dollars upfront.
Stricter income requirements: There could be some minimal incomes that need to be made per year, which, if not met, could lead to poor terms again.
Rates can vary: Always do your research and compare with online lenders, as they could have better deals.
Tough repayment terms: Another reason to research your options beforehand as there may not be a possibility with banks to change terms such as prepayment or making partial payments to pay off the loan faster.
How to get approved for your personal loan
Your credit is key: Make sure that you do a deep dive into your credit and ensure that your score is healthy and there are no discrepancies. You want the highest score possible, or it can lead to higher interest rates.
Davis adds, “Always check your credit report and look for areas to improve before applying for a personal loan.”
Shop around. Go with the bank that will give you the best deal from the get-go. That’s why a marketplace for lending offers is so useful because it’ll include banks you have never considered.
“Whatever the reason for your loan, your best bet is the one that will give you the overall best terms every time,” Davis adds.
Check with online banks for deals. Online-only banks have less overhead and more room for better options.
“The process tends to be automated and fully digital. You’ll be surprised how low the rates can go,” Davis continues.
Make sure only one hard check. There are ways that you can apply with lenders to ensure your credit score is protected.
“Be careful to only apply for the loan with different vendors within the same time period – otherwise your credit score may suffer,” Davis mentions.
Borrow responsibly. That means only borrowing what you need and what you can pay back.
Chris Panteli, who founded Life Upswing, the UK-located financial news and advice company, says, “Even if you’re offered more than you originally needed, it doesn’t mean you should take it. Be happy you got approved, but realize that larger amounts require larger overall expenditure.”
He shares an example: “I was about to get a couple thousand more dollars than needed. My best decision was to only go for the amount I needed, as this was debt.”
In the end
Always do your research and find the best offer regardless of it coming from an online lender or a bank. Make sure to read the fine print and look for the options that lead to the least amount of financial stress.