Best Bank Loans 2021: Compare Personal Loans From Banks
Personal bank loan rates
The average interest rate on a two-year personal loan from a bank is 9.46%, according to the most recent data from the Federal Reserve.
As with most credit products, the rate you receive on a personal loan from a bank depends a lot on your credit score. The higher your score, the lower your rate and the less interest you will pay over the life of the loan. The interest rate also affects your total monthly payment, as does the length of the term; a longer term means lower monthly payments, but you pay more interest over time.
Use our personal loan calculator to estimate the interest and monthly payments for a personal loan, based on your credit rating.
Advantages and disadvantages of bank loans
Although personal loans from banks are often structured the same as online loans, the process of obtaining and qualifying for one may be different. Here are some pros and cons to consider:
Benefits of bank loans
Banks typically offer lower rates, higher loan amounts, and benefits to existing customers.
If you already have accounts at the bank, you can keep them all in one place.
Customer service can be more robust in banks. You can even have the same contact person for the duration of the loan.
Disadvantages of bank loans
Many banks require an in-person visit to complete a loan application.
Few banks offer an online prequalification process, so you can’t see what rates and terms you qualify for before you apply.
The costs of operating physical locations can increase APRs.
Do all banks offer personal loans?
Not all banks offer personal loans. Some, like American Express, offer personal loans only to current clients who receive pre-approval. Other banks, like Bank of America, chase away and A capital letter, currently do not offer personal loans.
If you are applying for a personal loan from a bank or other lender, they may ask you to indicate what you plan to use the money for. Typically, people take out personal loans for a variety of purposes, including debt consolidation loans, financing larger purchases such as boats and recreational vehicles, or home improvement projects.
How to qualify for bank loans
Bank loans can offer benefits to their customers, but they usually have more stringent credit score requirements than online loans.
Some financial planners say that having an existing relationship with employees at your bank, whether it’s a small local bank or a large national bank, can increase your chances of qualifying. But getting approved often comes down to how you look on paper. Consider these tips for the best chance of qualifying.
Build your credit. At least a few years of credit history showing on-time payments and no defaults will help your application, but avoid opening new accounts right before you apply (this can hurt your credit). Check your credit report for errors that can hurt your score and dispute any error in line.
Review your credit score. Many banks have a minimum credit score that they accept from a borrower, but aim for above the minimum requirement for the best chance at a low rate. You can get your free credit score with NerdWallet.
Increase your income and pay off your debts. Reducing the percentage of your income spent on debt, also known as the debt-to-income ratio, will be viewed favorably by most lenders. In many cases, lenders want to make sure that you earn at least enough income to cover your existing obligations, as well as the loan you are applying for. Yet the lower your DTI, the better.
Increase your savings, if you can. Showing a lender that you have enough money in the bank to face a tough time can boost their confidence that you’ll make your payments on time.
Alternatives to bank loans
Whether you are a loyal customer of the bank or not, it is always a good idea to consider other options for personal loans. The best loan for you is the one with the lowest rate and the payments that match your budget. Here are some alternatives to bank credit:
Credit unions: These non-profit, member-only organizations consider the full financial situation of loan applicants and are more likely to approve borrowers with average credit (FICO score range 630 to 689) or bad credit ( FICO score range 300 to 629). Federal credit union loan rates are capped at 18%.
Online loans: With online lenders, you can complete the entire loan process on a mobile device and get financing in a day or two. Unlike some banks, online lenders usually allow you to pre-qualify for financing in order to see your estimated rate. This triggers a drop in credit, which allows you to check your rate and terms with multiple lenders without affecting your credit score.
Home equity loans and HELOC: This can be a lower cost borrowing option if you have equity in your home, but you also risk losing it if you don’t pay off the loan.