Best Personal Loans of 2020

Best Personal Loans of 2020

If you need a large amount of cash for a major, upcoming expense, or have even gotten a little too deep into high-interest credit card debt, there is a way out.

Personal loans are available from many sources that can provide an unsecured loan with a fixed (or straight), monthly payment and term. You can generally use the proceeds for just about any purpose.

That’s why we prepared this list of the Best Personal Loans of 2020. We’ve included 10 of the most popular personal loan providers, based not only on the terms they offer but also on what they are best suited for.

10 Best Personal Loans October 2020

Under each option, we’ve detailed the minimum and maximum loan amount, available terms, interest rate ranges, minimum credit score requirements, and fees, if any.

We’ve also listed what we believe each personal loan lender is best for. This may be the ultimate factor in deciding which lender you will work with.

After all, the best personal loan lender will be the one that best meets your personal needs and preferences.

Here are the 10 best personal loan options for October 2020:

  1. SoFi: Best for Unemployment Protection
  2. Lightstream by SunTrust: Best for Extended Loan Terms
  3. LendingTree: Best for Personal Loan Shopping
  4. PenFed Credit Union: Best for Credit Union Membership or Low-Interest Rate
  5. Marcus by Goldman Sachs: Best for No Late Fees
  6. LendingClub: Best for Fair Credit
  7. FreedomPlus: Best for Lowering Your Rate with Compensating Factors
  8. Upstart: Best for Limited Credit History
  9. Avant: Best for Impaired Credit
  10. Prosper: Best for Adding a Co-borrower

SoFi: Best for Unemployment Protection

Best known for providing student loans and student loan refinances, SoFi also offers personal loans. And they offer a whole lot more, including home financing, small business financing, investment services (SoFi Invest), and insurance (auto, homeowners, renters, and life). Their service has expanded and now has more than 1 million members.

For personal loans, SoFi offers both fixed and variable rate loans. You may also include a cosigner if you are unable to qualify based on your own credit and income. Funds can be used for just about any purpose, including home improvements, credit card consolidation, medical procedures, and relocation assistance.

SoFi is unique in that it provides unemployment protection. It’s available if you lose your job through no fault of your own. You must be in good standing at the time you begin participation in the program, and protection will come in three-month increments, up to a maximum of 12 months. During the forbearance term, interest will continue to accrue on your loan, but you will have the option to make interest-only payments. You will also be required to participate in the SoFi Career Strategy program, which will include career coaching and other services.

SoFi Features:

  • Minimum/maximum loan amount: $5,000 to $100,000
  • Available terms: 2 to 7 years
  • Interest rate range: Fixed rates, 5.99% to 18.53% APR (with AutoPay discount); Variable rates, not published
  • Minimum required credit score: 680
  • Loan fees: None

Learn More: Read our full SoFi Personal Loan Review.

Lightstream by SunTrust: Best for Extended Loan Terms

The arm of SunTrust Bank, dedicated specifically toward personal loans, offers loan terms as long as 12 years (144 months). That’s unusually long for personal loans, which are most commonly available in terms of not more than 5 to 7 years. Loan proceeds can be used for any purpose, including debt consolidation, home remodeling, medical expenses, and wedding expenses. They can also be used for major purchases, including autos, swimming pools, boats, and timeshares.

One factor to be aware of with LightStream is that it does require deeper credit history. They prefer at least five years of active credit, including a mix of loan types that include credit cards, installment loans, and even a mortgage.

Lightstream Features:

  • Minimum/maximum loan amount: $5,000 to $100,000
  • Available terms: 2 to 12 years
  • Interest rate range: 3.49% to 19.99% APR (with AutoPay discount)
  • Minimum required credit score: 660
  • Loan fees: None

Learn More: Read our full Lightstream Personal Loans Review.

LendingTree: Best for Personal Loan Shopping

LendingTree is an online marketplace, offering not only personal loans, but also home loans, credit cards, business loans, and student loans. They also offer insurance and debt relief programs. LendingTree isn’t a direct lender, but involves participation by dozens of lenders, including at least some on this list.

The big advantage of having multiple lenders participating is that you have an excellent chance of getting the loan you want with the best possible pricing. You will complete a single online application, and receive offers from personal loan providers with programs you likely qualify for.

LendingTree may also be an excellent choice if you are looking for a personal loan with bad credit. Since lenders offering financing at all credit levels participate on the platform, there’s a better chance of approval with a lender specializing in poor credit profiles.

Because the loan amounts, terms, interest rates, minimum credit scores, and loan fees vary by lender, we’re not able to supply a range for any of those categories through LendingTree. If you have average or better credit, you can expect the participating lenders to fall within the ranges of the other lenders listed in this guide. But if you have poor credit, loan amounts are likely to be more restricted, and both interest rates and loan fees will be higher.

LendingTree Features:

  • Minimum/maximum loan amount: Varies by lender
  • Available terms: Varies by lender
  • Interest rate range: Varies by lender
  • Minimum required credit score: Varies by lender
  • Loan fees: Generally none

Learn More: Read our full LendingTree Personal Loans Review.

PenFed Credit Union: Best for Credit Union Membership or Low-Interest Rate

Short for Pentagon Federal Credit Union, PenFed is the third-largest credit union in America, with more than $25 billion in assets and nearly 2 million members. That last fact is one of the big advantages of working with PenFed. As a credit union, you’re not a customer of the institution, but a member. That generally leads to more flexible consideration, particularly in regard to loan qualification.

As a member, you can also participate in other services offered by the credit union. That includes checking and savings accounts, certificates of deposit, IRAs, credit cards, auto loans, mortgages and home equity lines, and student loans. You don’t need to be a member of the credit union to apply for a personal loan, but membership will be required once your loan is approved. That usually involves little more than opening a checking account.

The application process is entirely online, and once approved, your funds can be available as early as the next business day. In fact, if there is a PenFed branch where you live, you can go in and pick up your check immediately. However, branches are available only in Maryland, Virginia, the District of Columbia, California, Florida, Georgia, Hawaii, Nebraska, New Mexico, New York, North Carolina, and Texas.

PenFed Features:

  • Minimum/maximum loan amount: $600 to $20,000
  • Available terms: 1 to 5 years
  • Interest rate range: 6.49% to 17.99%
  • Minimum required credit score: Not provided
  • Loan fees: None

Marcus by Goldman Sachs: Best for No Late Fees

Marcus by Goldman Sachs does not charge a late fee if you pay late, miss a payment, or pay less than the full amount due. They’ll simply add more interest to your loan balance, increasing the final payoff. Of course, late payments will be reported to the credit bureaus, and a consistent pattern may result in your loan being put in default status. But, for the occasional late payment, you’ll be given a pass on the typical late-fee charge.

In fact, after making 12 consecutive monthly payments on your loan in full and on time, you’ll be eligible to defer a monthly payment for one month.

Personal loans can be used for just about any purpose, including consolidating credit card debt, renovating your home, paying for your wedding, or even covering moving expenses. One limitation to be aware of, however, is that Marcus by Goldman Sachs accepts only individual applications, not joint applications. You can apply for a personal loan either online or by phone. After approval, you’ll receive your funds in 1 to 4 business days.

And if you’re interested, Marcus by Goldman Sachs also offers online savings and high-yield CDs.

Marcus by Goldman Sachs Features:

  • Minimum/maximum loan amount: $3,500 to $40,000 (with AutoPay discount)
  • Available terms: 3 to 6 years
  • Interest rate range: 6.99% to 19.99%
  • Minimum required credit score: Not indicated
  • Loan fees: None

LendingClub: Best for Fair Credit

LendingClub is a peer-to-peer lending platform, in which individual investors participating in the website fund your loan. In that way, there’s no bank intermediary making the loan. Not only do they offer personal loans, but also auto refinancing, medical financing, and small business loans. The company has already provided $50 billion in loans to more than 3 million customers.

Personal loans are available in amounts up to $40,000, and for virtually any purpose. You can also apply for financing either individually or with a joint applicant. And, if you can’t pay your loan on the due date, they provide a 15-day grace period.

One disadvantage to be aware of with LendingClub is that it can take up to two weeks for your loan to be approved. That likely has something to do with the peer-to-peer nature of the loaning process. Once you make an application, you’ll need to wait until a sufficient number of investors commit full funding of your loan request. There will be an additional delay in the disbursement of your funds. That’s one of the disadvantages of not being a direct lender.

LendingClub Features:

  • Minimum/maximum loan amount: $1,000 to $40,000
  • Available terms: 3 to 5 years
  • Interest rate range: 10.68% to 35.89%
  • Minimum required credit score: 600
  • Loan fees: Origination fee 2% to 6%

Learn More: Read our full LendingClub Personal Loans Review.

FreedomPlus: Best for Lowering Your Rate with Compensating Factors

Based in Tempe, Arizona, FreedomPlus makes loans available through Cross River Bank (a New Jersey state-chartered commercial bank) or MetaBank.

One of the advantages offered by FreedomPlus is that you may qualify for their lowest rates even if you have a low credit score. Normally, if you’re at the low end of the minimum required credit score range, you’ll pay something close to the maximum interest rate. But FreedomPlus gives you a workaround.

You may be able to qualify for a lower interest rate by 1) adding a co-borrower with sufficient income, 2) using at least 85% of the loan proceeds to directly pay off qualifying existing debt, or 3) showing proof of sufficient retirement savings ($40,000 or more). These are what are known as compensating factors, because they can be used to minimize the impact of a low credit score.

The minimum income requirement is $40,000 per year, and your debt-to-income ratio — excluding your mortgage payment — should not exceed 40%.

FreedomPlus Features:

  • Minimum/maximum loan amount: $7,500 to $40,000
  • Available terms: 2 to 5 years
  • Interest rate range: 7.99% to 29.99% APR
  • Minimum required credit score: 640
  • Loan fees: 0 to 4.99% — most borrowers will pay 4.99%

Upstart: Best for Limited Credit History

Upstart is not a direct lender, but instead a web platform offering personal loans through partnering banks. You’ll complete an application on the website, which will include a “soft credit pull” that will affect your credit score. If you are qualified, you’ll receive offers from partnering banks. All loan offers will require verification of the information you provide on your application, including a “hard pull” of your credit report by the direct lender.

Upstart is best for those with limited credit history. Though they require a minimum credit score of 600, they do accept applicants with insufficient credit history to produce a credit score. That doesn’t mean you can be approved with a credit score of 525, but if you don’t normally use credit and have no credit score, you may still be eligible for financing.

That said, they will not extend personal loans if you have had any bankruptcies or public records on your credit report. You must also have fewer than six inquiries on your credit report in the last six months, and no collections or past due accounts within the past three years.

The company advertises that 99% of personal loan funds are sent just one business day after signing loan approval documents.

Upstart Features:

  • Minimum/maximum loan amount: $1,000 to $50,000
  • Available terms: 3 to 5 years
  • Interest rate range: 8.69% to 35.99%
  • Minimum required credit score: 600
  • Loan fees: None

Learn More: Read our full Upstart Personal Loans Review.

Avant: Best for Impaired Credit

Avant has provided over $6.5 billion in loans for more than 800,000 consumers, many of whom have fair or even poor credit. Avant isn’t a direct lender, but the loan servicer on personal loans funded by WebBank. Most of their customers have credit scores ranging between 600 and 700, but they may accept scores that are a bit lower than 600. And once your loan is approved, the funds will be available as early as the next business day in most cases.

Avant also has an interesting variation on personal loans. By using your vehicle as security, you can receive a lower interest rate on a personal loan. However, the maximum loan amount will be limited to $25,000, while the maximum term will be no more than four years. But the administration fee will drop to 2.5%, from the usual 4.75%.

Avant Features:

  • Minimum/maximum loan amount: $2,000 to $35,000
  • Available terms: 2 to 5 years
  • Interest rate range: 9.95% to 35.99% APR
  • Minimum required credit score: 580
  • Loan fees: Administrative fee, up to 4.75%

Learn More: Read our full Avant Personal Loans Review.

Prosper: Best for Adding a Co-borrower

Similar to LendingClub, Prosper is a peer-to-peer lending platform. In fact, the personal loan offering between the two companies is almost identical. Even if your credit score is below the minimum of 640, you can make an application with a co-borrower who has a higher credit score, and be approved for the loan. The platform has funded more than $17 billion in loans to well over 1 million people.

One limitation to be aware of regards consolidation loans. Once your loan is approved, the funds will be deposited into your bank account — not sent out to the creditors you are looking to pay off. You’ll need to make sure you continue making required monthly payments on those obligations until you’re able to pay them off fully out of your own bank account.

Prosper Features:

  • Minimum/maximum loan amount: $2,000 to $40,000
  • Available terms: 3 to 5 years
  • Interest rate range: 7.95% to 35.99%
  • Minimum required credit score: 640
  • Loan fees: Origination fee, 2.4% to 5%

Learn More: Read our full Prosper Personal Loans Review.

What is a Personal Loan and How Do They Work?

Personal loans are financing you obtain without needing to put up any security. This is similar to credit cards, which are also unsecured, except personal loans come with a specified term, a single interest rate over the term of the loan, and a fixed monthly payment.

They also come with higher loan limits than credit cards. With a good to excellent credit score and a high income, you may be able to borrow up to $35,000, or even $100,000. That’s a lot of borrowing power for an unsecured loan.

Best of all, the proceeds can be used for just about any purpose. Though consolidating high-interest credit cards is the most common purpose, they can also pay for major expenses like medical costs not covered by insurance, wedding expenses, vacations, home improvements, and major purchases like boats and cars.

To qualify for a personal loan, you’ll need to meet standard lending requirements. That includes a credit score that’s acceptable to the lender, as well as an income sufficient to carry the new loan payment along with your other existing obligations.

In addition to financing major expenses or consolidating credit cards, personal loans have another big advantage. When you consolidate multiple credit cards onto a new personal loan, those credit cards will show up on your credit report as paid loans. That often results in an increase of 20 or 30 points in your credit score shortly after the payoffs.

It may seem as if you’re simply moving debt from one creditor to another, but the credit bureaus prefer a single large loan to multiple obligations.

Personal Loans FAQs

How is a personal loan better than a credit card?

Personal loans can have several advantages over credit cards, including:

  • A lower interest rate than the average rate on the credit cards you’re paying off.
  • A lower monthly payment than the combined payments on the credit cards you’re paying off.
  • Fixed interest rate for the term of the loan, compared to the variable rates on credit cards that change with every movement in the prime rate.
  • A fixed-term and monthly payment that guarantees your debt will be paid off by the end of the loan.
  • Consolidating multiple loan payments into a single monthly payment.

When does a personal loan make sense?

The best example is when you have high-interest credit card debt. Simply by moving several credit cards with an average interest rate of 22% onto a single personal loan with an interest rate of 14% will save you 8% per year in interest. And just as important, it will enable you to pay off your credit card debt in a fixed amount of time, generally five years or less.

It can also be a necessary step when you’re looking for financing for unconventional purposes. That could include uncovered medical expenses or funds for a business startup. The latter can be particularly important because banks are very reluctant to make loans for new businesses.

When is a personal loan a bad idea?

Like any type of debt, if you’re going to use a personal loan as an extension of your paycheck, it’s not a good idea. For example, even though you can use the funds to pay for a vacation, this will leave you paying for an event over the next five years or more that was completed within one week.

Another potential disastrous situation — one that applies to any type of debt consolidation — is when you use a personal loan to pay off several credit card balances, but continue using the credit cards.

If the purpose of the new loan is to get out of credit card debt, that approach will have the opposite effect. Not only will you have your old credit card debt consolidated on the new personal loan, but you’ll also have new credit card debt added on top of it.

How do origination fees work?

Origination fees are deducted from your loan proceeds upon distribution. For example, let’s say you take a $20,000 personal loan with a 5% origination fee. The lender will deduct the origination fee — $1,000 —from the loan proceeds. You’ll receive net proceeds of $19,000, though your loan obligation will remain at $20,000.

Many of the personal loan lenders we’ve provided on this list don’t charge an origination fee. You should certainly favor those lenders if you can qualify for the loan programs they offer.

Can a personal loan be used to pay for college or to refinance a student loan?

No. Due to the unique nature of student loan financing, personal loans are prohibited from being used to pay for either current college expenses or to refinance existing student loans.

Personal Loans Pros & Cons

Pros:

  • Consolidate high-interest credit card debt onto a single loan with a fixed interest rate, monthly payment, and term.
  • Personal loans are completely unsecured.
  • High loan amounts, generally up to $40,000 but some as high as $100,000.
  • Loan proceeds can be used for any purpose (except student loans).
  • Single-digit interest rates if you have excellent credit.
  • Many personal loans are available with no fees.

Cons:

  • Interest rates are high for average, fair, and especially for poor credit.
  • Some personal loan lenders charge origination fees and administrative fees that can be as high as 8% of the new loan amount.
  • If not used responsibly, personal loans can trap you in a debt cycle of consolidating high-interest credit cards only to run up those balances again after getting the new loan.
  • Some lenders charge double-digit interest rates even if you have good or excellent credit.

Which Is The Best Personal Loan For You?

Used responsibly, personal loans can be an excellent financial tool. At their best, they can be used to pay off high-interest credit card debt, enabling you to get off that treadmill.

Unlike credit cards, they have fixed repayment terms, after which your debt will be fully paid. They’re also a flexible way of getting cash on a short-term basis to cover large expenses, like uncovered medical bills or business financing.

But like all debt, personal loans must be used responsibly. If you use it to pay off high-interest credit cards, then run up the balance on the same credit cards after the consolidation, you’ll just be moving one step closer to bankruptcy.

Make sure you know exactly what your purpose will be in using a personal loan and use it to improve your financial situation. Used that way, personal loans can be even more valuable than credit cards.

Other Personal Loan Options Reviewed:

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Prevent Loan Scams provides guides, reviews & information to help consumers through every restorative step of their financial journey.

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