Best Online Personal Loans for July 2024

The Bottom Line

There is no shortage of excellent personal loan lenders for every situation. SoFi is our favorite overall lender thanks to its high minimum loan amounts, lack of loan fees, and more. However, SoFi has a high minimum loan amount, and you may need good credit to qualify. 

The good news is that no matter what your situation, there’s another lender that may work for you. For example, Upgrade, Upstart, and Best Egg are great options for borrowers with less-than-ideal credit. Meanwhile, First Tech offers loan amounts lower than any other lender on our list.

Guide to Choosing the Best Online Personal Loan

Where to Get an Online Personal Loan

When you’re shopping for a personal loan, you have three primary options for lenders: traditional banks, credit unions, and online-only lenders.

• A bank or credit union: A loan from a traditional bank or credit union can be a great starting point if you already have a relationship with one. Traditional banks may charge loan fees and often have higher interest rates. Credit unions, on the other hand, often have more affordable rates and fees.
• Online lenders: Online-only lenders can be a good alternative to traditional banks and credit unions. Because they operate online, these lenders aren’t specific to any location—many operate in all 50 states. Online lenders often have more options and lower interest rates than banks or credit unions. 

In Investopedia’s 2023 Personal Loan Borrower survey, when asked to select the top factors that determined where they applied for a loan, the lender’s website was cited in 48% of current borrower responses.

Should You Apply For an Online Personal Loan?

An online personal loan is one of the most flexible types of loans available. Personal loans can be used for nearly any purpose, from debt consolidation to home improvements to weathering a financial storm.

Personal loans also have the benefit of affordable interest rates. Though your interest rate depends largely on your APR, rates can start significantly lower than other types of debt, such as credit cards. This makes personal loans a great tool for consolidating high-interest debt.

According to Investopedia’s 2023 Personal Loan Borrower survey, debt consolidation is the most common reason cited for getting a personal loan. Paying for home improvements and large purchases were the next two most common reasons.

Online lenders also have the benefit of accessibility. Rather than having to visit a bank branch to apply, an online personal loan means you can apply in just minutes in the comfort of your own home. You can often find out if you’re approved immediately and may be able to get your loan funds the same or the next business day.

Comparing Online Personal Loans

When you’re shopping around for a personal loan, there are several factors to compare to ensure you find the right one for your situation:

• Interest rate: Personal loan rates range from less than 7% to as high as 36%, at least for the lenders on our list. Your interest rate has a major impact on your loan cost, so it’s important to shop around to ensure you find the most affordable loan.
• Loan fees: Some lenders charge origination fees when you take out your loan. Additionally, most lenders charge late fees when you make a late payment. However, by shopping around, you can avoid some or all of these fees.
• Loan amount: Personal loan amounts can range from just a few hundred dollars to $100,000, but amounts vary by lender. Decide ahead of time how much you’ll need to borrow so you can choose a lender that fits your needs.
• Repayment terms: Personal loan repayment terms range from one year to seven years, in most cases. The longer the repayment term, the lower the monthly payment, but the higher the overall interest cost. Terms vary by lender.
• Credit requirements: Some lenders offer personal loans to lenders with fair or poor credit, while others require good or excellent scores. Check your score before applying and then research lenders that fit that requirement.
• Co-signer or co-applicant rules: A co-signer can make it easier to qualify for a loan or help you get a better interest rate, but not all lenders allow them. If you think you’ll need a co-signer, limit your search to lenders that permit them.
• State availability: Not all lenders offer personal loans in every state. When narrowing down your list, make sure to consider lenders that offer loans in your state.
• Loan use restrictions: A personal loan can be used for nearly any purpose, but some lenders may have use restrictions in place. For example, lenders may prohibit borrowers from using loan funds to pay for college, start a business, or other purposes. 

Shorter Repayment Terms Can Save You Money

Based on data from 18 lenders, the average personal loan interest rate is 23.88% for terms of about 48 months. However, the Fed reports that 24-month personal loans have an average rate of 12.35%.

If you can afford the higher monthly payments that come with a shorter term, it could save you a lot of money. The chart below shows the potential savings of a 24-month term as opposed to a 48-month term on a $10,000 personal loan:

Average APR by Credit Score

Keep an Eye on the Fed's Target Federal Funds Rate

The Fed held rates steady at its most recent meeting March 19-20—the fifth consecutive meeting at which it has done so. From March 2022 through July 2023, the Fed increased its target rate range 11 times, from near zero to 5.25–5.50%. Before that rate-hiking campaign, the average APR for a 24-month personal loan from commercial banks was 9.38%. That number has risen along with the Fed's rate hikes to 12.35%.

Fed members indicated that they expect to cut rates later this year, but until that happens, lending rates are unlikely to get any lower. Because personal loans typically are fixed-rate products, the rate you get when you take out your loan is the rate you'll have for the duration of that loan. Lending rates typically will rise or fall along with what the Fed does, so if you expect to have a longer repayment term, it might be a good idea to wait until later this year or next year to get a personal loan. The Fed is scheduled to meet again April 30–May 1.

Advantages and Disadvantages of Online Loans

Pros of Online Loans

There's a bunch of reasons why you may consider an online loan over a loan from a traditional brick-and-mortar lender. One of the primary advantages of online loans is convenience. Borrowers can apply for a loan from the comfort of their homes at any time, eliminating the need to visit a physical bank branch. The online application process is typically streamlined, allowing users to fill out forms on their own time. Applicants can also submit documents electronically.

Because everything is transmitted electronically, online loans may have a faster approval process compared to traditional loans. In addition, online lenders frequently operate with lower overhead costs than traditional banks, allowing them to offer competitive interest rates as they have less expenses they need to cover.

Borrowers may also have more luck leveraging online lenders, as online lenders are not necessarily confined to a geographical area. A borrower may be able to find better or broader loan terms by turning to the internet as opposed to only relying on lenders within it's nearly physical residence.

Cons of Online Loans

There's also unquestionably some downsides to turning to an online lender as opposed to a traditional lender. One of the biggest risks is that the quality of customer service can vary among online lenders. You may not get a direct loan service administrator, and it may be more difficult to have questions fielded by one specific customer service representative.

While online lenders often offer competitive rates, individuals with lower credit scores may still end up with higher interest rates compared to those with excellent credit. Be mindful that turning to an online loan may not preclude from secure favorable loan terms in itself.

Sharing personal and financial information online can pose security risks. Borrowers need to make sure they are using secure and reputable lending platforms that employ encryption and other security measures to protect sensitive data. Note that digital application processes require you to enter your personal information such as your social security number and personal financial information.

Last, there is a personal preference element to online loans. For some, folks may prefer the convenience of online loans at the expense of face-to-face interactions with loan officers. On the other hand, some individuals prefer the personal touch and direct communication offered by traditional banks. Online loans may lack the personalized guidance and assistance that a physical branch provides, which can be a drawback for those who value in-person relationships.

How to Qualify For and Apply For an Online Personal Loan

Nearly all lenders have a minimum credit score that you’ll need to qualify. Other loan qualifications may include a maximum debt-to-income ratio or a minimum amount of income.

When you apply for your loan, you’ll have to consent to a credit check. You’ll also have to provide information so the lender can verify your identification, contact information, employment, and income. For example, you’ll need to provide a government-issued ID, as well as recent pay stubs or another form of proof of income.

When you’re ready to apply, here’s how the process works:

1. Pre-qualify with multiple lenders: This step allows you to get rate quotes from multiple lenders, usually without a hard inquiry in your credit report.
2. Complete an online application: Once you’ve chosen a lender, you can complete your online application, which should only take a few minutes.
3. Review and accept your loan offer: You may find out if your application was approved immediately, depending on your financial situation.
4. Receive your loan funds: Many lenders offer loan funding as quickly as the next business day and, in a few cases, the same business day.
   

Online Personal Loans vs. Traditional Personal Loans

We started touching on this in the last section, but let's dive into the main differences between receiving a personal loan from an online lender as opposed to a traditional, in-person lender.

Application Process

The application process for online personal loans is typically conducted over the internet. Borrowers can complete applications, submit documents, and receive approvals electronically. Though you may be guided to an online application from a brick-and-mortar lender, you also have the option to do an in-person visit. In-person visits to a physical bank or lending institution may actually be required, and you may need to fill out paper applications and provide physical copies of supporting documents.

Accessibility and Convenience

Borrowers can apply for online loans from the comfort of their homes or any location with internet access, making the process convenient and accessible 24/7. Traditional brick-and-mortar lenders often have office hours, and borrowers may need to visit a physical branch during operating hours which may be inconvenient from a scheduling or logistic perspective.

Speed of Approval/Disbursement

Online loans may have quicker approval processes, and funds can be disbursed faster, sometimes within a day or even hours after approval. As online lenders collect information digitally, your information may be more efficiently input and processed into underwriting models. On the other hand, brick-and-mortar loans may take longer due to manual review of hand-prepared documents and the need for certain documents to be transmitted in-person.

Customer Service

To be clear, customer service may vary from lender to lender regardless of whether they have in-person or online presence. Very broadly speaking, online loan facilitators often provide help or information through online channels such as e-mail, social media, chat support, and phone. Many of these options are also available through in-person lenders, though face-to-face interactions is another customer service function.

Security and Privacy

The Internal Revenue Service encourages tax filers to submit their returns online, as they claim "e-file standards keep information safe and protected". Switching over to personal loans, you may feel the same way. However, others may not feel comfortable transmitting personal information over the internet and would prefer to submit paper-based documents for their loan application.

Alternatives to an Online Personal Loan

Personal loans offer plenty of benefits and can be used for many different situations. However, depending on your creditworthiness, financial situation, and what you need the money for, there may be better options. Here are a few to consider:

• 0% APR credit card: For a smaller purchase that you can pay off quickly, consider applying for a 0% APR credit card. An introductory offer can make all your purchases interest-free for anywhere from six months to two years. As long as you can repay the balance in that time, you won’t pay any interest, making it cheaper than a personal loan.
• Home equity financing: Home equity financing allows you to borrow against the equity you have in your home. Examples of home equity financing include home equity loans, home equity lines of credit, and cash-out refinances.
• Personal line of credit: If you’re financing a longer-term project like home improvements, a personal line of credit may give you the flexibility you need. It combines the features of a personal loan and a credit card, giving you access to the money you need when you need it.
• 401(k) loan: If you have a 401(k) through your employer, you may be able to borrow from your retirement account balance. A 401(k) loan has the benefit of no credit check, but also comes with some risks, including the risk of reducing your savings during retirement. For that reason, a 401(k) loan shouldn’t be your first choice.

Why You Should Trust Us

Investopedia collected and analyzed hundreds of key data points from over 70 companies across three months to identify the most important factors for readers choosing a online loan providers. We used this data to review each company for fees, repayment terms, income requirements, and other features to provide unbiased, comprehensive reviews to ensure our readers make the right decision for their needs. Investopedia launched in 1999, and has been helping readers find the best online loan companies since 2020.

How We Pick the Best Online Loans

To evaluate and rank personal loan providers we collected hundreds of data points across 70 lenders, including traditional banks, credit unions, fintechs, and special interest finance companies. We researched and evaluated APRs, loan amounts and terms, fees, customer experience, and much more. To rank the lenders in our database and to generate star ratings, we weighted the data we collected, based in part on what consumers told us were the most important features of a personal loan and lender in a survey we conducted. We grouped those factors into four broad areas:

• Loan costs (advertised APR, fees, and six other factors): 29.25%
• Loan terms (loan amount, repayment term, and three other factors): 22.25%
• Borrowing requirements (credit score, membership requirement, and six other factors): 28.5%
• Additional features (online application, pre-qualification, and eight other factors): 20%

Learn more about how we evaluated personal loans in our complete methodology.

Guide to Online Personal Loans

Learn more about personal loans:

• What Is a Personal Loan?
• How Do Personal Loans Work?
• When Are Personal Loans a Good Idea?
• How to Get a Personal Loan
• How to Apply for a Personal Loan
• How to Use a Personal Loan
• Where to Get a Personal Loan
• Personal Loans Vs. Credit Cards
• Alternatives to Personal Loans
• Personal Loan Calculator
• Personal Loans Methodology