The Ultimate Guide to Choosing a Personal Loan

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You need cash and want to apply for a personal loan. But you also want to make a smart choice and find the best personal loan for your situation.

Where to begin? Choosing a personal loan requires time, careful research and comparing personal loan companies. But with some legwork, you can find the information you need to wisely choose a personal loan right for your finances.

Here is the general process for applying for personal loans:

  • Figure out what you need in a personal loan, and what credit and income qualifications you need to meet.
  • Find personal loans that meet your needs.
  • Get pre-approvals from several lenders and compare those personal loan offers to choose which is best for you.
  • Complete a final personal loan application.
  • Sign your loan agreement and receive the fund disbursement.

Get a personal loan that meets your needs

To find a personal loan that’s right for you, you must first figure out what you’re looking for. You’ll need to consider your needs, your financial situation and your credit.

1. Define how you plan to use the personal loan

Are you using a personal loan to cover a medical bill or car repair? Or are you consolidating credit card debts? How you plan to use the personal loan funds could affect your choices.

While some personal loan providers allow you to use funds for any purpose, others limit how a personal loan can be used. Payoff, for example, is an online lender that solely focuses on credit card debt consolidation.

A clear vision of how you plan to use your personal loan will also help you figure out how big your personal loan should be.

2. Figure out how much you need to borrow

You know how you’re using a loan. You’ll also need to borrow enough to cover those costs and any origination fees you don’t plan to pay out of pocket.

If you’re consolidating credit card debt, you’ll need to borrow enough money to pay off credit card balances and cover any loan or origination fees. This Bankrate calculator can help you add up credit card balances.

Maybe you plan to use a personal loan to cover a major expense, like a move or a wedding. You should fully research all the costs you can expect to cover and decide on a budget to ensure you borrow enough money.

Most lenders have a minimum and maximum balance for personal loans. So if you know how much you need to borrow, you can quickly determine if a lender would agree to those terms.

If you need a large loan, you’ll need a lender like SoFi that offers personal loans up to $100,000. But if you want a smaller loan, such as $1,500, Upstart or Avant would be better bets, with minimum personal loan balances set at $2,000.

3. Take an honest look at your financial situation

You don’t want to end up getting a personal loan that is too expensive and stretches your finances too thin. Check how you feel about your financial situation in general: Are your stressed or confident? Can you keep up with bills or do you constantly scramble to avoid falling behind?

“If a borrower is struggling to make minimum payments on current debt, a personal loan will usually not help,” says Kevin Gallegos, vice president of Phoenix operations for Freedom Financial Network, a personal loan provider.

Instead of considering new debt, Gallegos suggests that struggling borrowers “look into other help.” If your existing financial situation and debt are more than you can realistically handle, look into options like debt negotiation, settlement, or even bankruptcy.

4. Calculate the monthly payments you can afford

Before getting a personal loan, it’s important to know if you can actually afford the monthly payments.

Getting a personal loan you can afford will include choosing terms that result in affordable monthly payments. The amount of these payments will be determined by the terms of your personal loan:

  • Initial balance, or how much you borrow when you take out a loan.
  • Repayment length, or how many months you’ll be repaying the loan.
  • Interest rate, or how much the lender will charge you each month to borrow money.

You can use this monthly payment calculator to see how different terms would affect the monthly payment you’ll face.

As you check out different potential loan terms, make sure you’re keeping in mind your budget and other financial goals. Choose a target monthly payment that leaves some extra cash in your monthly budget.

5. Check your credit score and reports

Once you have a handle on your own financial needs, you’ll want to check your credit. You can view your free annual credit reports through AnnualCreditReport.com. For your credit score, you can try free credit check tools like CreditKarma or Credit Sesame to get score estimates.

This will give you an idea of how your credit history will be viewed by lenders. You can compare lenders’ credit requirements to your credit score or reports to see if it’s a good match.

A good credit score for personal loans will be at least 680. With this FICO score or higher, you’ll qualify for a wider range of personal loans and lower interest rates. However, some lending platforms, like Avant, set credit score minimums for personal loans as low as 580.

If your credit score is under 580, don’t panic. You might still be able to get personal loans for bad credit. But you should expect to do more legwork to find a loan – and plan to pay more to borrow.

Make a list of your personal loan needs

Read up on different types of personal loans and features to make sure you’ve thought through everything you need.

If you don’t have good credit, for example, you might want a co-signer to improve your chances of approval. But not all personal loan companies provide the option to apply for a personal loan with a co-applicant.

Make a full list of all your needs and requirements for a personal loan, including monthly payments, balance, credit requirements and more. This will give you a checklist you can compare lenders against to ensure it’s a good fit.

Comparing personal loan companies to find the right lender

You know what you need in a personal loan. Now you can start looking for personal loan companies whose product match those needs. As you shop around for personal loans, you’ll also want to compare offers to find the best personal loan provider.

With your criteria for a personal loan in place, start looking around at different lenders.

Check out personal loan companies of all kinds, from online lenders to big banks and credit unions. These various types of lenders have different structures and business models – which means they’ll also have distinct underwriting processes, fees, and interest rates.

Identify personal lenders who would meet your needs

As you look at each lender, check their loans against your list of requirements. Our personal loan marketplace can help you quickly compare loans and filter lenders by your top criterion.

Maybe you have a high income, great credit and your biggest goal is keeping costs to a minimum. SoFi and Earnest offer personal loans with low rates and no origination fees, and you’d likely qualify for a loan.

On the other hand, you might have a lower credit score and are looking for lenders who will approve your application. Avant and Lending Club  are online lenders that have less-strict credit score and income requirement for approval.

Research the credibility of each lender, as well, to ensure it’s legitimate. Try to find at least three personal lenders that will both meet your personal loan needs and have credit requirements you satisfy.

Get multiple personal loan pre-approvals

Settling for the first lender you come across is one of the most common personal loan mistakes.

To get the best deal on a personal loan, you’ll need to have options. You’ll get these when you apply for pre-approval with a few lenders that meet the requirements on your personal loan checklist.

In a pre-approval application, the lender will ask for some limited identification and financial information:

  • Name, birth date and other identifying information.
  • Contact info like email, phone number, and residential address.
  • Employment history including job title, current employer, and income.
  • Loan details like desired balance and how you intend to use the loan.

Many pre-approval processes also include a credit check. Make sure it’s a soft credit pull, which won’t affect your credit score.

Lenders will use the information to evaluate if you’re a good fit. If you are, you’ll be pre-approved for a loan. Lenders usually generate some personalized loan offers based on your initial information, usually one or more of different term lengths.

Compare personal loan interest rates

You have a few offers for personal loans in hand. How do you compare them to find the loan that is the best deal?

One of the most important factors that determine the cost of your personal loan is the interest rate, or the annual percentage rate (APR). This will tell you how much interest you will be paying on your personal loan.

As you’re comparing personal loan rates, “make sure the lender is clear about the interest rate,” Gallegos says. Reputable lenders will be transparent about their personal loan rates.

Looking at APRs to find the lowest one will be how you identify the best interest rate – this loan comparison tool can help. Chances are good that the personal loan with the lowest APR will be the most cost-effective option over the life of the loan. Look for the loan with the lowest APR that also has a monthly payment you can afford.

Watch for personal loan fees

In addition to interest rates, personal loan fees can also add to your costs. “Personal loans typically charge an origination fee of one to five percent of the loan amount,” Gallegos says, though some lenders don’t charge origination fees at all. However, sometimes a fee-free loan will have a higher interest rate.

You should compare the full costs of each personal loan to know which is truly the best deal. This handy loan comparison tool from Bankrate can be useful for this purpose.

Pay attention to how open the lender is about costs. “A good lender will be upfront about fees, and work with the borrower to calculate overall interest savings,” Gallegos says. On the other hand, if fees are unclear or hidden in small print, that’s the red flag of an untrustworthy lender.

Fully research each lender

You’ll also want to evaluate each lender on more subjective terms. Look into personal lender reviews and see what kind of experience customers have had with the company. Make sure all personal loan companies you’re considering have transparent costs and fees.

Research features that are important to you. If you do most of your money management on your smartphone, for example, you might value a well-built mobile app.

Or, if you have less-than-perfect credit, you might value flexible credit requirements.

“Some of the best independent lenders use different criteria than a traditional bank or credit union to evaluate how likely a person is to repay a loan,” Gallegos points out. This could improve your chances of approval, even with a credit history most lenders wouldn’t consider.

Apply for and get a personal loan

At this point, you’ve identified a lender that meets your needs. You’ve been pre-approved and compared personal loan offers. You’ve probably identified the personal loan with the best terms for you.

Completing a personal loan application

The next step is to apply for a loan with the lender who is your top choice. You’ll fill out a full personal loan application similar to the pre-approval application, but it might ask more detailed or in-depth questions:

  • Proof of identity, such as a passport, driver’s license, birth certificate.
  • Social Security number.
  • Proof of employment and income, such as an offer letter or recent paystub.
  • Bank account number to which the lender can deposit loan funds.

The application will also include a hard credit pull to give the lender greater insights into your credit history.

Besides these items, lenders might require additional documents specific to their underwriting process. Some will be interested in your education level and might ask for proof of a degree. The lender might even ask for bank statements or other financial information.

Lenders’ processing times will vary from 24 hours to up to two weeks. Check the lender’s site for information on their timeline for processing loan applications. You’re also free to contact the lender to check on your application.

Signing a personal loan agreement

You’ve submitted the application and the lender has reviewed it. If everything checks out, the lender will extend you a formal offer through a loan agreement.

The loan agreement should fully outline the details and terms of the personal loan. This will include all fees and costs, repayment length, and disbursement details for how you’ll receive the loan funds. Make sure to fully review this contract so you understand what you’ll be signing on for.

If the terms of the personal loan are as expected, it’s time to sign the loan agreement. Your signature will make the loan agreement binding, and you’ll be responsible for adhering to the terms or the loan.

Once the lender receives the signed loan agreement, it will disburse the funds to your account, usually through direct deposit. It might take a day or two for the transfer to process and deposit. Once you’ve received the money, you’re free to use the personal loan funds how you want.

Overall, getting a personal loan isn’t too complicated. Choosing the right loan that works for you will require research, comparison, and some tough decisions. But getting the cash you need now, without compromising your financial future, is the key to making wise decisions when getting a personal loan.

Interested in a personal loan?

Here are the top personal loan lenders of 2018!
LenderAPR RangeLoan Amount 
1 Includes AutoPay discount. Important Disclosures for SoFi.

SoFi Disclosures

  1. Personal Loans: Fixed rates from 6.990% APR to 14.865% APR (with AutoPay). Variable rates from 6.255% APR to 12.555% APR (with AutoPay). SoFi rate ranges are current as of September 1, 2018 and are subject to change without notice. Not all rates and amounts available in all states. See Personal Loan eligibility details. Not all applicants qualify for the lowest rate. If approved for a loan, to qualify for the lowest rate, you must have a responsible financial history and meet other conditions. Your actual rate will be within the range of rates listed above and will depend on a variety of factors, including evaluation of your credit worthiness, years of professional experience, income and other factors. See APR examples and terms. Interest rates on variable rate loans are capped at 14.95%. Lowest variable rate of 6.255% APR assumes current index rate derived from the 1-month LIBOR of 2.08% plus 4.425% margin minus 0.25% AutoPay discount. For the SoFi variable rate loan, the 1-month LIBOR index will adjust monthly and the loan payment will be re-amortized and may change monthly. APRs for variable rate loans may increase after origination if the LIBOR index increases. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account.

    To check the rates and terms you qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull.See Consumer Licenses.
  2. Minimum Credit Score: Not all applicants who meet SoFi’s minimum credit score requirements are approved for a personal loan. In addition to meeting SoFi’s minimum eligibility criteria, applicants must also meet other credit and underwriting requirements to qualify.
  3. SoFi Personal Loans are not available to residents of MS. Maximum interest rate on loans for residents of AK and WY is 9.99% APR, for residents of IL with loans over $40,000 is 8.99% APR, for residents of TX is 9.99% APR on terms greater than 5 years, for residents of CO, CT, HI, VA, SC is 11.99% APR, and for residents of ME is 12.24% APR. Personal loans not available to residents of MI who already have a student loan with SoFi. Personal Loans minimum loan amount is $5,000. Residents of AZ, MA, and NH have a minimum loan amount of $10,001. Residents of KY have a minimum loan amount of $15,001. Residents of PA have a minimum loan amount of $25,001. Variable rates not available to residents of AK, TX, VA, WY, or for residents of IL for loans greater than $40,000.
  4. Terms and Conditions Apply: SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet SoFi’s underwriting requirements. Not all borrowers receive the lowest rate. To qualify for the lowest rate, you must have a responsible financial history and meet other conditions. If approved, your actual rate will be within the range of rates listed above and will depend on a variety of factors, including term of loan, a responsible financial history, years of experience, income and other factors. Rates and Terms are subject to change at anytime without notice and are subject to state restrictions. SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. Licensed by the Department of Business Oversight under the California Financing Law License No. 6054612. SoFi loans are originated by SoFi Lending Corp., NMLS # 1121636. (www.nmlsconsumeraccess.org)

2 Includes AutoPay discount. Important Disclosures for Payoff.

Payoff Disclosures

  1. All loans are subject to credit review and approval. Your actual rate depends upon credit score, loan amount, loan term, credit usage and history. Currently loans are not offered in: MA, MS, NE, NV, OH, and WV.

3 Important Disclosures for FreedomPlus.

FreedomPlus Disclosures

  1. All loans available through FreedomPlus.com are made by Cross River Bank, a New Jersey State Chartered Commercial Bank, Member FDIC, Equal Housing Lender. All loan and rate terms are subject to eligibility restrictions, application review, credit score, loan amount, loan term, lender approval, and credit usage and history. Eligibility for a loan is not guaranteed. Loans are not available to residents of all states – please call a FreedomPlus representative for further details. The following limitations, in addition to others, shall apply: FreedomPlus does not arrange loans in: (i) Arizona under $10,500; (ii) Massachusetts under $6,500, (iii) Ohio under $5,500, and (iv) Georgia under $3,500. Repayment periods range from 24 to 60 months. The range of APRs on loans made available through FreedomPlus is 4.99% to a maximum of 29.99%. APR. The APR calculation includes all applicable fees, including the loan origination fee. For Example, a four year $20,000 loan with an interest rate of 15.49% and corresponding APR of 18.34% would have an estimated monthly payment of $561.60 and a total cost payable of $7,948.13. To qualify for a 4.99% APR loan, a borrower will need excellent credit on a loan of $15,000 with a term of 24 months, and qualify for at least two of the following discounts: (1) add a co-borrower who has sufficient income; (2) use at least fifty percent of the loan proceeds to directly pay off existing debt; or (3) show proof of having at least forty-thousand dollars in retirement savings – contact FreedomPlus for further details.

4 Important Disclosures for Citizens Bank.

Citizens Bank Disclosures

  1. Personal Loan Rate DisclosureFixed interest rates from 6.49% – 19.49% (6.49% – 19.49% APR) based on applicable terms. Lowest rates range from 5.99%-18.99% (5.99%-18.99% APR), are for eligible applicants, require a 3-year repayment term, and include our Loyalty and Automatic Payment Discounts of 0.25 percentage points each, as outlined in the Loyalty Discount and Automatic Payment Discount disclosures. Subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change.
  2. Loyalty Discount: The borrower will be eligible for a 0.25 percentage point interest rate reduction on their loan if the borrower has a qualifying account in existence with us at the time the borrower has submitted a completed application authorizing us to review their credit request for the loan. The following are qualifying accounts: any checking account, savings account, money market account, certificate of deposit, automobile loan, home equity loan, home equity line of credit, mortgage, credit card account, student loans or other personal loans owned by Citizens Bank, N.A. Please note, our checking and savings account options are only available in the following states: CT, DE, MA, MI, NH, NJ, NY, OH, PA, RI and VT. This discount will be reflected in the interest rate and Annual Percentage Rate (APR) disclosed in the Truth-In-Lending Disclosure that will be provided to the borrower once the loan is approved. Limit of one Loyalty Discount per loan, and discount will not be applied to prior loans. The Loyalty Discount will remain in effect for the life of the loan.
  3. Automatic Payment Discount: Borrowers will be eligible to receive a 0.25 percentage point interest rate reduction on their Citizens Bank Personal Loan during such time as payments are required to be made and our loan servicer is authorized to automatically deduct payments each month from any bank account the borrower designates. If our loan servicer is unable to successfully withdraw the automatic deductions from the designated account two or more times within any 12-month period, the borrower will no longer be eligible for this discount.

5 Important Disclosures for LendingPoint.

LendingPoint Disclosures

  • Loan approval is not guaranteed. Actual loan offers and loan amounts, terms and annual percentage rates (“APR”) may vary based upon LendingPoint’s proprietary scoring and underwriting system’s review of your credit, financial condition, other factors, and supporting documents or information you provide. Origination or other fees from 0% to 6% may apply depending upon your state of residence. Upon LendingPoint’s final underwriting approval to fund a loan, said funds are often sent via ACH the next non-holiday business day. LendingPoint makes loan offers from $2,000 to $25,000, at rates ranging from a low of 15.49% APR to a high of 34.49% APR, with terms from 24 to 48 months. The loan offer(s) shown reflect a 28 day payment cycle which is being offered as a courtesy as many of our customers are paid on a biweekly schedule and thus this may better align the loan payment dates with your actual income receipt schedule.

6 Important Disclosures for LendingClub.

LendingClub Disclosures

All loans made by WebBank, Member FDIC. Your actual rate depends upon credit score, loan amount, loan term, and credit usage & history. The APR ranges from 6.16% to 35.89%. For example, you could receive a loan of $6,000 with an interest rate of 7.99% and a 5.00% origination fee of $300 for an APR of 11.51%. In this example, you will receive $5,700 and will make 36 monthly payments of $187.99. The total amount repayable will be $6,767.64. Your APR will be determined based on your credit at time of application. The origination fee ranges from 1% to 6% and the average origination fee is 5.49% as of Q1 2017. There is no down payment and there is never a prepayment penalty. Closing of your loan is contingent upon your agreement of all the required agreements and disclosures on the www.lendingclub.com website. All loans via LendingClub have a minimum repayment term of 36 months or longer.


7 Important Disclosures for Earnest.

Earnest Disclosures

  1. Earnest does not lend in Alabama, Delaware, Kentucky, Nevada, or Rhode Island.

8 Important Disclosures for Avant.

Avant Disclosures

* The actual rate and loan amount that a customer qualifies for may vary based on credit determination and other factors. Funds are generally deposited via ACH for delivery next business day if approved by 4:30pm CT Monday-Friday. Avant branded credit products are issued by WebBank, member FDIC.

** Example: A $5,700 loan with an administration fee of 4.75% and an amount financed of $5,429.25, repayable in 36 monthly installments, would have an APR of 29.95% and monthly payments of $230.33


* Important Disclosures for Upgrade Bank.

Upgrade Bank Disclosures

* Your loan terms are not guaranteed and are subject to our verification and review process. You may be asked to provide additional documents to enable us to verify your income and your identity. This rate includes an Autopay APR reduction of 0.5%. By enrolling in Autopay your payments will be automatically deducted from you bank account. Selecting Autopay is optional. Annual Percentage Rate is inclusive of a loan origination fee, which is deducted from the loan proceeds. Late payments or subsequent charges and fees may increase the cost of your fixed rate loan. All loans made by WebBank, member FDIC. Please refer to Upgrade’s Terms of Use and Borrower Agreement for all terms, conditions and requirements.

** Accept your loan offer and your funds will be sent to your bank via ACH within one (1) business day of clearing necessary verifications. Availability of the funds is dependent on how quickly your bank processes this transaction. From the time of approval, funds should be available within four (4) business days.

7.73% – 29.99%$1,000 - $50,000Visit Upstart
6.26% – 14.87%1$5,000 - $100,000Visit SoFi
6.99% – 35.97%*$1,000 - $50,000Visit Upgrade
8.00% – 25.00%2$5,000 - $35,000Visit Payoff
4.99% – 29.99%3$10,000 - $35,000Visit FreedomPlus
5.99% – 18.99%4$5,000 - $50,000Visit Citizens
15.49% – 34.49%5$2,000 - $25,000Visit LendingPoint
6.16% – 35.89%6$1,000 - $40,000Visit LendingClub
6.99% – 18.24%7$5,000 - $75,000Visit Earnest
9.95% – 35.99%8$2,000 - $35,000Visit Avant
Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality and will make a positive impact in your life. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print understand what you are buying, and consult a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time. Please do your homework and let us know if you have any questions or concerns.