If you are trying to get ahead of your finances, consolidate debt, or are looking to make a specific big purchase, personal loans are worth considering over credit cards. Personal loans small and large normally offer significantly lower interest rates than credit cards, and more structured payment schedules, which can help prevent you from falling behind on payments. But if you find yourself in need of a personal loan, where should you start? Turning to traditional lenders like big banks and even credit unions is simply not a viable option for everyone. Here are a few nonconventional lenders to consider.
How We Came Up with This List
We explored options that differ from conventional lenders in the most positive ways they offer low minimum credit scores, low income requirements, unsecured loans, online platforms, and fast funding. The following are all designed to help you become more financially stable, stay on track, build your credit, or all of the above. They all boast the ability to check your rate without affecting your credit, which allows you to compare multiple options without taking your credit score, and therefore make an informed decision that’s the best fit for you. Because everything is done online, it’s all expedited, which means you’ll have your decision, and your money, quicker.
Overview of the Best Small Personal Loan Lenders
|Upgrade||Financial health, particularly credit|
|Upstart||Experienced and independent investors, AI|
|Avant||Those who have access to decent collateral|
|Best Egg||Variety of loan products|
|Rocket Loans||In-person support|
The Best Small Personal Loan Lenders
Upgrade offers online banking features with several flexible personal loans, all at the touch of a finger. Their options range from as small as $1,000 to as high as $50,000, and for uses such as debt consolidation, credit card refinance, home improvement, and major purchases. If you’re interested, you can start by checking your rate without impacting your credit score, which means they won’t pull your credit report right away. They boast fast funding, no prepayment penalties, and fixed rates, meaning your interest rate won’t vary based on the terms of your loan.
Additional features include credit score monitoring that includes personalized recommendations, summaries, weekly updates, rewards banking options, and a help center that offers articles on different subject matters. You can apply as a single person or with a co-applicant, which can help boost your chances for approval as well as your terms. Upgrade does require origination or closing fees.
As far as online lenders go, this is a pretty viable option, with a clean and simple interface. Their focus on credit health is important, and something that stands out from their competition.
LendingClub is another online lender that offers personal loans for debt consolidation, credit card consolidation, balance transfer loans, and home improvement loans that range from $1,000 - $40,000. Like Upgrade, you can apply as a single person or with a co-applicant, and checking your rate will not affect your credit score.
One of the drawbacks to consider is their resource center, which is a collection of informative articles. Not much of a personal touch. They also do not offer fixed rates, which means that your interest rate could vary based on how much you borrow, and the term of your loan. This is not exactly the most conducive to flexible and accessible borrowing that benefits the borrower.
Upstart is another online platform powered by AI (founded by former Google employees) that has partnered with banks to bring consumers more access to affordable credit. They offer quick personal loans ranging from $1,000 - $50,000 for moving, home improvement, medical, credit card consolidation, debt consolidation, and even wedding loans. Like the two aforementioned products, Upstart promises fast funding and the ability to check your rate without affecting your credit score.
Upstart does not offer much in the way of educational resources or credit monitoring, and I can’t say I’m a huge fan of the AI approach. Maybe I’m old-fashioned, but I still prefer accessibility to a real human being who can review my case and help me make an informed decision. I still think people are the best approach, especially for those who are new to borrowing.
Like all of the above, Avant is an online lender with a mission to make credit more accessible to everyone. Offering both secured and unsecured loans, their biggest selling point thus far is human contact - you can talk to real people when you need to. As someone with experience in lending, this is a standout feature, especially if this is your first loan or you don’t have a lot of experience borrowing money. Never underestimate the power of guidance from a real person who can empathize with you, and then make recommendations.
Also, unlike the above-mentioned products, you can pledge collateral, like your car, to gain access to lower rates. The more secure a bank or lender feels giving you money, the more they are likely to give you. If pledging collateral is an option for you, this is a great option to consider to make sure you are getting the best possible deal on a loan. The drawback to this option is if you fall behind on payments, you could lose your asset to your lender.
Best Egg offers personal loans for moving expenses, debt and credit card consolidation, home improvements, travel, major purchases, special occasions (like parties and celebrations), and baby and adoption expenses. Their loan amounts range from $2,000 - $35,000. Checking their rates, like all the others, will not affect your credit score.
Of the seven options reviewed here, Best Egg has the best general reviews, ranked the #1 personal loan by Best Company in 2019, and given an A+ accreditation by the Better Business Bureau, which should make you feel warm and cozy about their commitment to ethics. Other than their high rankings, one of their attractive selling points is their categories specific to things like travel and baby expenses. These are categories that are often overlooked by other lenders or not viewed as valid reasons to take out debt.
Visit Best Egg
Originally founded in 2005 as a peer-to-peer lending platform, Prosper offers fixed rates and terms to customers, and investment opportunities in the loans that offer returns. Peer-to-peer lending allows lenders to be more flexible than traditional platforms because their loans are backed by investors. Some peer-to-peer companies use criteria that are far less strict than traditional lenders to assess creditworthiness.
Their personal loans include debt consolidation, home improvement, medical/dental loans, big purchases, and auto loans all in amounts that range from $2,000 - $40,000. The drawbacks are their high interest rates and fees. Also, be wary of labels that seem attractive. Just because peer-to-peer lending is thought to be more flexible doesnt mean youre automatically going to get the best deal. With [wp_shortcode_38], even a high credit score and income wont guarantee you the best rates.
Rocket Loans is a subdivision of Quicken Loans, and the product from this list you are most likely to have heard of. Rocket offers debt consolidation, auto loans, home improvement, travel, and large purchases, and lives up to its name by offering fast decisions and fast funding, just like the others on this list. With middle-grade interest range and loan amounts, Rocket scores pretty high with the BBB and the CFPB (Consumer Financial Protection Bureau).
Because of their low fees and decent rates, their loans are good for debt consolidation, whether that be other personal or auto loans, or credit card balances. They also offer a Loan Support Center and Active Client Services, with a portal you can log into and manage your loan servicing progress. In addition to basic educational resources, they are the only service on our list to offer a phone number that connects directly to their servicing team (real humans again!). This may not seem like a deal-breaker upfront, but if you run into an issue or want to know youre getting the best deal, talking to a person can be more helpful than FAQs.
When should I get a personal loan vs. use my credit card?
Credit cards are okay for smaller, and more everyday purchases, but it’s generally best to try and keep your balances low, and make regular payments. Personal loans are not revolving, meaning you receive a set amount, and once you’ve spent it and paid it off, you don’t have a new available balance. Because of their lower rates and more structured payment schedules, personal loans are general better for bigger purchases like travel expenses, wedding and event planning, and moving. You can also use personal loans to help pay off credit card bills, which can save you up to thousands of dollars in interest.
What can I use a personal loan for?
It depends on the lender, but personal loans are generally flexible. You can use them to make big purchases like furniture or appliances, automobiles, travel, medical expenses, or to pay down other debt. Ultimately the loan purpose and how it will be administered will be determined by your lender. Some give you a lump sum up front, others want to pay your bills or expenses directly.
What are the benefits of going to a bank vs. applying online?
This will depend on what you’re looking for out of your experience. Banks can give you a personable experience by having you sit down with a real loan officer to discuss your goals and your options. But at the end of the day, banks are a business, and they have to make money off of you, which is why online platforms exist. The online market fills a need to make credit and loans more accessible to those who don’t have the high credit scores and income to be bankable. Plus, it’s easier and faster to apply, get an answer, and get your money.