Best Bank Loans 2021: Compare Bank Personal Loans

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Bank personal loan interest rates

The average interest rate on a two-year personal loan from a bank is 9.58% according to the latest data from the Federal Reserve.

As with most credit products, the interest rate you get on a personal loan from a bank depends heavily on your creditworthiness. The better your score, the lower your interest rate and the less interest you will pay over the life of the loan. The interest rate affects your total monthly payment as well as the term; a longer term means lower monthly payments, but you pay more interest over time.

Take advantage of our Personal loan calculator to estimate interest and monthly payments on a personal loan based on your creditworthiness.

Advantages and disadvantages of bank loans

While bank personal loans are often structured similarly to online loans, the process to get one and qualify can be different. Here are a few advantages and disadvantages to keep in mind:

Benefits of bank loans

  • Banks usually offer lower interest rates, higher loan amounts and perks for existing customers.

  • If you already have accounts with the bank, you can keep them all in one place.

  • Customer service can be more robust at banks. You may even have the same contact person throughout the life of the loan.

Disadvantages of bank loans

  • Many banks require a personal visit to fill out a loan application.

  • Few banks offer an online pre-qualification process so you can’t see what tariffs and conditions you qualify for before submitting your application.

  • Costs for operating stationary locations can drive up the effective annual interest rate.

Do all banks offer personal loans?

Not every bank offers personal loans. Some like American Express, offer personal loans only to existing customers who receive pre-approval. Other banks like Bank of America, chase and Capital one, currently do not offer any personal loans at all.

When applying for a personal loan from a bank or other lender, you may need to specify what you want the money to be used for. Typically, people take out personal loans for a variety of purposes including Debt Consolidation Loans, Financing larger purchases such as boats and campers or home improvement projects.

How to Qualify for Bank Loans

Bank loans can be beneficial to their customers, but they usually have stricter creditworthiness requirements than online loans.

Some financial planners say that having an existing relationship with employees at your bank – be it a small local bank or a large national bank – can increase your chances of getting a qualification. But approval often depends on how you look on paper. For the best chance of qualifying, consider these tips.

  • Build up your credit. At least a couple of years of credit history showing on-time payments and no defaults will help your application, but avoid opening new accounts just prior to the application (it can affect your creditworthiness). Check your credit report for errors that could affect your score as well deny all mistakes on-line.

  • Check your credit rating. Many banks have a minimum credit score that they will accept from a borrower, but aim above the minimum in order to get the best chance at a low interest rate. You can Get your free credit score with NerdWallet.

  • Increase your income and pay off debts. Reducing the percentage of your income used on debt, also known as the debt-to-income ratio, is viewed positively by most lenders. In many cases, lenders want to make sure that you are generating at least enough income to cover your existing obligations plus the loan you are applying for. The lower your DTI, the better.

  • Increase your savings if you can. Showing a lender that you have enough money in the bank to cover a difficult time can build their confidence that you will make payments on time.

Alternatives to bank loans

Whether you are a loyal bank customer or not, it is always a wise decision other personal loan options. The best loan for you is the one with the lowest interest rate and payments that fit your budget. Here are some alternatives to a bank loan:

Credit unions: These members-only nonprofits take into account the full financial picture of loan applicants and are more likely to approve borrowers with average credit (FICO score range of 630-689) or poor credit (FICO score range of 300-629). The federal credit union interest rate is capped at 18%.

Online loans: With online lenders, you can complete the entire loan process on a mobile device and get funding within a day or two. Unlike some banks, online lenders usually allow you to pre-qualify for funding to see your estimated interest rate. This triggers a gentle credit pull so you can check your interest rate and terms with multiple lenders without affecting your credit score.

Home Equity Loans and HELOCs: This can be a cheaper loan option if you have equity in your home, but you also risk losing it if you don’t pay back the loan.

How to Qualify for an Online Personal Loan

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