Where Can I Get a Loan?

You can get a loan from a bank, credit union or online lender. Your credit score and credit history will determine if you qualify to borrow money and what the annual interest rate (APR) will be for the loan.

People with a good-to-excellent credit score will usually have more loans to choose from because they are likely to qualify for a larger amount if needed and typically receive lower interest rates.

What Do Lenders Look At To Approve a Loan?

Lenders primary purpose when looking at approving you for a loan is to assess your credit stability, ability, and willingness to pay. Lenders check your credit score and your credit history to see if you are a good or bad credit risk for paying off the loan.

Lenders also look at your debt-to-income ratio (DTI), which compares the total amount of debt you owe each month with the total amount you earn. A higher debt-to-income ratio could mean that you are seen as a credit risk to fulfill the loan agreement. Lenders can even predict a borrower's likelihood to make payments on time during the length of the loan.

Can I Get a Loan If I Have Bad Credit?

If you have a low credit score, display a poor credit history or appear as a bad credit risk, it may be more difficult to qualify for a loan, but it's possible. Some lenders will offer loans to people with bad credit, but chances are that there will be fewer loan options to choose from, and the interest rates and fees will be higher than the average.

If you have bad credit you can consider the following:

  • Use a co-signer on the loan—this person accepts responsibility of the loan if you stop making payments.
  • Provide collateral against the loan, such as a car.
  • Apply with an online lender that uses alternative data to make lending decisions.

Where Can I Apply for a Loan?

Before applying for a loan research the best loan offers available based on your credit scores. You can get prequalified or preapproved for a loan, but you will still be required to submit a formal loan application to a lender.

Prior to submitting the application, it is a good idea to review your credit report and your credit score so you can remedy any issues that may appear. Once you submit your application, a lender will pull your credit report and score to review your financial history to help inform their decision.

Remember, checking your own credit report never affects your credit score, and you can check as often as you need.

Bank Loans

Banks and larger financial institutions offer loans such as a mortgages, home equity line of credit (HELOC), auto loans, as well as credit cards. Some larger banks offer unsecured personal loans.

Credit Union Loans

Credit unions can make loans and offer varying financial services such as credit cards, auto loans, mortgages, personal loans, and home equity loans.

Since credit unions are owned by their members and operate as not-for-profit organizations, they tend to offer very competitive loan rates with less restrictive approval qualifications and more flexible loan terms. You have to be a member of a credit union before you can apply for a loan.

Online Lender Loans

Online lenders have emerged as a popular choice for personal loan borrowers because of their data-driven approach in assessing credit with faster approvals on loans.

If you are considering applying for a loan with an online lender, you should always make sure to do some research to find the right loan that matches your credit standing and understand the costs associated. Once you have found a loan you like, the application process takes place online, and you should receive an answer whether you qualify or not right away.

While online lenders still look at your credit score and credit history, they may also utilize alternative credit data to assess borrowers. Alternative data doesn't necessarily show up on your credit file, and can include non-reported credit data such as payments for utility bills, mobile phone bills, rent and cable television bills.

Americans averaged less than one late payment per billing cycle in 2017, so online lenders that use alternative data may approve borrowers who don't qualify with a traditional lender.

Comparing offers and the different loan details from different lenders will help you find the right loan that works best to fit your needs. It will also ensure that you put yourself in the best position to make your loan payments on time.