How to compare personal loans

Personal Loan Rates Comparison

Personal loans are a versatile financing option, which is why there are currently 21.1 million outstanding personal loans in the U.S.1 

There are large personal loans for vehicle repairs or unexpected medical bills and small-dollar personal loans for minor expenses like utility bills, groceries, and other day-to-day costs. Each type of personal loan will have a different interest rate, monthly payment, and minimum credit score requirement. 

The personal loan you choose will depend on several factors, including:

Read on to learn more about personal loans, their rates, and what to expect when shopping for the right financial product for you.

What Are Personal Loans?

A personal loan is any loan a borrower uses to pay for personal expenses instead of business or commercial expenses. Any personal expense you can’t cover with your regular income could be settled with a personal loan.

But what’s the best reason for a personal loan? Most people take out personal loans for the following reasons:

  • Dealing with unexpected medical bills
  • Need expensive parts for a car repair
  • Need glasses but can’t afford them  
  • Require home repairs due to natural disasters 
  • Covering children’s school costs

As we mentioned, a personal loan can come in many different forms. Each personal loan will come with its own specific interest rate, APR, repayment terms, and other conditions. Therefore, reviewing all of this information is crucial before signing for the loan you’re considering.

How Do Personal Loans Work?

The way your personal loan works will depend on which type you choose. That being said, a basic process will usually apply to most personal loans.

The application and funding process for your personal loan will usually look something like this:

Step No.Application Process StepDescription
1Research LendersLook for financial institutions that offer the type of loan you need, and compare their terms and interest rates.
2Check EligibilityReview the lender’s eligibility criteria, such as credit score, income, and employment status.
3Gather DocumentsCollect necessary documents like ID proof, income statements, and credit reports.
4Fill Out ApplicationComplete the loan application form, either online or in-person, providing all required information.
5Submit ApplicationSubmit the completed application along with any required documents.
6Await ApprovalThe lender will review your application and may request additional information.
7Loan OfferIf approved, you’ll receive a loan offer detailing the terms, interest rate, and repayment schedule.
8Review and Accept OfferCarefully review the loan offer and, if acceptable, agree to the terms.
9Receive FundsOnce the loan is approved, the funds are usually deposited directly into your bank account.
10RepaymentBegin making repayments as per the schedule specified in the loan agreement.

Make Sure You Understand Your APR

The APR is one of the most important factors to consider when shopping for your new personal loan. No matter what type of loan you’re looking for, it will have an APR, and you must know what it is before agreeing to the loan. 

Even if you desperately need a loan for bad credit, make sure to understand the APR and terms before signing for it. APR stands for annual percentage rate, which represents the total cost of the loan if you were to have it for one calendar year.

The APR is arguably the most important detail to review before signing a loan agreement. If you’re thinking, “I need a payday loan immediately, “pause and take a moment to research the APR and total loan amount.

The Difference Between the APR and Interest Rate

The APR is a more all-encompassing assessment of the actual cost of a loan or financial product. While the interest rate only considers the interest cost, the APR combines the following costs:

  • The interest rate
  • The origination fee
  • The processing fee
  • Additional costs associated with the personal loan

If a lender is only referencing the “interest rate,” make sure you ask about the APR specifically. Knowing the APR will not only tell you the actual cost of borrowing but will allow you to compare the cost of different personal loans you’re considering.

Some states even have laws that force lenders to specifically disclose the APR for their personal loans instead of just the interest rate. So whether you live in one of these states or not, make sure you’re fully aware of the APR before signing for your personal loan.

Types of Installment Loans Available 

So you’ve found yourself in a financial bind, and you need a little extra cash to get out of it. Many Americans are experiencing this exact same situation every day. You may be wondering which type of personal loan is right for you. Well, the answer may be the one with the lowest annual percentage rate (APR).

The installment loan you choose will largely depend on the one you can get approved for. Loan approval will depend on your current credit score and credit history. But once you know which installment loans you can get, it will come down to the APR range you’re able to get.

Below are some of the most common personal loans meant for a borrower with a lower-than-average credit score:

Personal Loans

Personal loans tend to be some of the best when it comes to a personal loan for a borrower with a low credit score. All lenders will likely offer different interest rates, which may fluctuate based on your specific score and the laws in your state. But on average, a personal installment loan usually carries a lower interest rate than many payday and title loans.

A personal loan is an unsecured loan, meaning you won’t have to offer any collateral to get one. Instead, these personal loans are given based on your credit score, income, and overall ability to repay them.

Personal loans typically come in larger amounts than payday or pawn shop loans. They also allow borrowers a longer loan term on average. Which means you’ll have more time to repay your loan amount. This can make your monthly payments more manageable, which makes personal loans one of the top installment loan options for bad credit.

Personal loans tend to be at the top of the list for many borrowers when it comes to bad credit loans. When you compare them to other low-credit options, you’ll usually find better interest rates and longer repayment terms. And the best part is, you can get installment loans for bad credit online!

Pawn Shop Loans

A pawn shop loan is a secured loan, which means you have to offer collateral to the lender to get one. The collateral for a pawn shop loan could be anything of value that they’re interested in. Typical items that pawn shops will accept as collateral include jewelry, electronics, and musical equipment.

The risky thing about these loans is that failing to repay the loan on time means losing your valuable item. The pawn shop will keep it and sell it to recover their money. They may also try to sneak in extra costs like a costly processing or origination fee.

Interest rates also tend to be very high for pawnshop loans. When comparing them to other loans, they may not be as high as payday loans, but they still end up being quite costly. And if you lose your collateral, then they’re even more expensive in the long run.

Suppose you want to avoid high interest rates, a small loan amount, and losing a valuable item. In that case, we’d recommend finding a different loan.

Title Loans

A title loan is a lot like a pawnshop loan but on a much larger scale. Which makes them even riskier options for a quick personal loan.

Title loans are another type of secured loan, which means you’ll need to offer the lender collateral. In this case, the collateral would be your vehicle’s title. Essentially, you’re risking your ownership of your car, truck, SUV, van, or motorcycle. If you can’t repay the loan on time, the lender will keep your vehicle and sell it to recover the loan amount.

The APR, interest rates, and even the origination fee for title loans tend to be very high. And since the loan amount is based on the value of your vehicle, it may be challenging to repay a high loan amount by the due date.

At CreditNinja, we believe that risking your vehicle isn’t worth it. This may not be the best personal loan if you need your car to get to work or take the kids to school.

Payday Loans

A payday loan is one of the most costly and dangerous personal loans out there. Payday loans are known for being predatory and taking advantage of borrowers in need.

A payday loan is an unsecured single-payment loan. You won’t need any collateral, and loans are given based on the promise to repay. Many payday lenders aren’t even concerned with checking a borrower’s credit history. Why? Because failing to repay the loan could make the payday lender more money in the long run through a process called “rollover.”

Rollover is when the lender extends the loan and adds more interest and fees. It usually traps borrowers into a cycle of debt that’s tough to escape. One of the problematic things about payday loans, aside from offering extremely high-interest rates, is that they need to be repaid in one lump sum instead of monthly payments.

Payday lenders pitch themselves as a quick and easy solution for a borrower with a low credit score. But It’s usually not worth the long-term financial repercussions.

The Minimum Credit Score for a Good Interest Rate

Your credit score is going to dictate which of these personal loans you have access to. Having a good credit score will mean access to a better, low-interest personal loan. However, only 6 in 10 Americans have a FICO score above 700.2

We recommend spending your time and energy on improving your credit score. This will help you get a larger loan. It will also help you find a loan with a low-interest rate, reasonable origination fee, and better loan term.

Credit scores usually range from 300 to 850 points. And when you get your credit score up to 670 or higher, it’s traditionally considered “good.” This is when you’ll start to see better interest rates and higher loan amounts.

Choosing Between Banks, Credit Unions, and Online Lenders

When you’re looking to get a personal loan, you’ll find that you can get one from traditional banks, credit unions, or online lenders. 

Each of these financial institutions has its own set of pros and cons, and the best choice for you will depend on various factors like your credit history, the interest rate you’re aiming for, and how quickly you need the loan funds. 

Let’s break down what each option has to offer:

Traditional Banks

  • Pros: Banks are often the go-to choice for many borrowers because they offer a range of financial services beyond just personal loans. They’re also generally reliable and have established reputations.
  • Cons: Banks may have stricter credit history requirements and might not offer the best personal loan rates, especially if your credit isn’t top-notch.
  • Best For: Those who already have an existing relationship with a bank and prefer in-person service.

Credit Unions

  • Pros: Credit unions are member-owned, which often allows them to offer personal loans at lower interest rates. They’re also more likely to work with you if you have less-than-perfect credit.
  • Cons: You’ll need to be a credit union member to get a personal loan, and their loan funding process might be slower than online lenders.
  • Best For: Those looking for lower interest rates and who don’t mind paying fees to become a credit union member. Credit unions are also great for debt consolidation loans if you’re looking to tackle credit card debt.

Online Lenders

  • Pros: Online lenders usually have a quick and easy application process, meaning you can get your loan funds faster. They also often cater to borrowers with a wider range of credit scores.
  • Cons: Some online lenders may offer personal loans with high-interest rates, especially for those with poor credit. Always read the fine print.
  • Best For: Those who need quick loan funding and prefer the convenience of completing the entire loan process online.

Key Considerations

  • Interest Rate: Always compare the interest rates from different lenders to ensure you’re getting the best deal.
  • Monthly Payment: Make sure the monthly payment fits within your budget. Use online calculators to help you figure this out.
  • Loan Purpose: Whether you’re looking to consolidate credit card debt or fund a large purchase, make sure the loan you choose aligns with your financial goals.

So, whether you’re leaning towards a traditional bank, a credit union, or an online lender, make sure to do your homework. Compare interest rates, consider the monthly payment, and think about how quickly you need the funds. That way, you’ll be better equipped to choose the lender that’s right for you.

Frequently Asked Questions About Personal Loans

What are origination fees, and how do they affect my loan?

Origination fees are one-time charges that personal loan lenders may require when you get a personal loan. Origination fees are usually a percentage of the loan amount and are either added to the loan balance or deducted from the loan funds deposited into your bank account. Make sure to factor the origination fee into your overall loan cost.

Can I use a personal loan for debt consolidation?

Yes, debt consolidation loans are a type of personal loan specifically designed to pay off multiple debts, like credit card debt. By consolidating your debts into one debt consolidation loan, you can often secure a lower interest rate and make single monthly payments, simplifying your financial life.

What is the minimum credit score needed for a personal loan?

The minimum credit score required can vary between personal loan lenders. Some personal loan lenders might offer loan amounts to borrowers with scores as low as 580, while others may require a minimum score of 670 or higher. A higher credit score will generally get you better interest rates and loan terms.

How quickly can I get the loan funds?

The speed at which you can get the loan funds depends on the lender and your bank account. Some lenders offer same-day or next-day funding, while others may take a few business days. Make sure to check this if you need the funds urgently.

Can I get a personal loan from a credit union?

Absolutely! Credit unions often offer competitive interest rates and more flexible terms compared to traditional banks. However, you’ll typically need to be a credit union member to apply for a loan.

How do monthly payments work?

Monthly payments are fixed payments you make to repay your loan. The amount is determined by your interest rate, loan amount, and loan term. Make sure you understand how much you’ll be paying each month and that it fits into your budget.

Can I prepay my loan without penalties?

Some lenders allow you to pay off your loan early without any penalties, while others may charge a fee. If you think you might want to pay off your loan ahead of schedule, make sure to check the lender’s policy on this.

Can I use a personal loan to pay off credit card debt?

Yes, using a personal loan to pay off credit card debt is common. It can be a smart way to consolidate high-interest debts into one manageable monthly payment, often at a lower interest rate. Just make sure to compare the interest rates and terms to ensure it’s a beneficial move for you.

What loan amounts are typically available?

Loan amounts can vary widely depending on the lender and your creditworthiness. Some personal loan lenders offer loan amounts as small as $1,000, while others may offer loan amounts up to $50,000 or more. Your income, debt-to-income ratio, and credit score will all factor into the amount you can borrow.

Do I need a bank account to get a personal loan?

Having a bank account is generally a requirement for most personal loan lenders. The loan funds are usually deposited directly into your bank account, and monthly payments may also be automatically withdrawn. Some lenders might offer alternative methods, but having a bank account is usually the most straightforward way to receive and repay your loan.

A Word From CreditNinja on Personal Loan Lenders and Personal Loans

There’s a lot to consider when getting approved for a personal loan. Many low-credit borrowers opt for a personal installment loan when comparing interest rates, repayment terms, and risks associated with installment loans. 

CreditNinja offers unsecured loans, so you don’t need collateral for approval. Eligible borrowers could get competitive interest rates, flexible repayment plans, and same-day funding.* If you’re considering applying for a personal loan, fill out our online application form to see how much you could get!


  1. Personal Loan Statistics │ Chamber of Commerce
  2. 30 credit score statistics to know in 2023 │ Lexington Law
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