When most people think of borrowing money, they typically think of a bank. Banks are the primary hotspot for money lending in the United States. They provide a lot of the liquidity that we see in the market. But non-traditional lenders have emerged to provide competition to these traditional banks.
If you’re thinking that you want to opt for a traditional bank loan for your personal loan, you probably want some more information to better understand if you’re making the right choice. Staying informed regarding the types of finance that you’re considering obtaining is the best way to make sure that you choose the right option.
This guide is a comprehensive explanation of personal bank loans and their associated benefits. It will also discuss the drawbacks associated with this form of loan, as well as the potential ramifications of obtaining one. Make sure to read through the entire article before you decide to proceed with any additional research – it is sure to answer any questions you may currently have about this lending product.
What Are Personal Bank Loans For?
Personal banks loans are simply personal loans that are distributed by banks. They provide their borrowers with capital they need for a variety of different costs. The difference between a personal bank loan and other forms of personal loans really comes down to the source. You can get personal loans from a variety of different lenders, but the general concept of the loan is pretty much the same.
We will explore personal banks loans and what they can do for you and your family in more detail below.
If you need to purchase a car or other essential item that you cannot afford to pay for upfront, personal bank loans are typically the type of loan that you will aim to acquire. You should make sure that you need the item that you are purchasing, we do not advise that you get into debt by buying things that you don’t need.
If you’re studying, you might find that personal bank loans provide you with capital at a lower interest rate than some student loans. In this case, you can take advantage of a personal loan to help cover some of the costs associated with being a full or part-time student. Always make sure to compare student loan rates with other forms of finance available to you.
This can be valid for both homes and cars. There will come a time when you have to make some repairs on something that you own. This could come at an unexpected time that results in you not being able to afford fixing things you need to fix. If there is something that needs urgent repair, don’t let it go untouched – you can often find a personal bank loan that will be able to improve your situation.
Medical expenses in the United States are extremely high, it’s important that you fully understand the total amount of money that you may have to pay if something is to happen. This is especially true for people who might not have medical insurance. Personal loans can help people pay medical costs that they otherwise might not be able to afford. It is important to note that some hospitals will have interest-free payment plans you can sign up for, if this is the case it will most likely be cheaper than a personal bank loan!
Secured Vs. Unsecured
There are two types of personal bank loans that you can get: secured and unsecured. These loans differ and have their own benefits and drawbacks. Secured loans are loans that are tied to an asset that you own. For example, you might secure a loan with a property that you own. If you end up missing payments or defaulting on the loan, the bank can come and claim your asset to help settle the outstanding debt that you have. For this reason, secured loans are considered much riskier for borrowers – you have to put other assets at risk to obtain this form of finance.
Unsecured loans on the other hand don’t have these associated risks. You don’t have to put up any collateral to obtain the loan. As you may be able to tell, these types of loans are much riskier for the lender, which means that you won’t get one of these loans as easily as you might get a secured one. They also tend to have much higher interest rates than secured loans.
Banks are much more likely to offer secured loans when compared to other non-traditional lenders. If you’re looking to get a secured personal loan, a bank loan is typically the best option you have. They will have much more flexibility when it comes to providing these types of loans. They will typically also have more flexibility when it comes to the types of assets you can use to secure the loan. Traditional lenders have many more resources when compared to smaller lenders.
Another way to help reduce your interest rates and increase your chances of getting personal bank loans is to co-sign the loan. Co-signers are individuals who offer up their signature to allow you to get a loan. This person is guaranteeing the loan – they will have to pay anything back that you are unable to. Their credit score is at risk if you don’t act responsible. For this reason, we highly recommend that you don’t use this form of loan unless you are certain you will be able to pay back what you owe. It’s unfair to put someone else’s financial future at risk for your own gain.
Advantages of Personal Bank Loans
As you can see, there are plenty of reasons people might want personal bank loans. But it can be hard to take in such a considerable amount of information at once. That’s why it’s sometimes best to look at things from a bird’s-eye-view. We’ve compiled a list of the top advantages of personal bank loans so you can have a look at it.
- Personal – At the end of the day, the primary advantage of using a traditional lender is the fact that you have a much more personalized experience. You get to speak with a lender face-to-face about what you’re looking to get out of your lending decision. They will be able to consult you on your best options, and may even recommend a different form of finance that is more suitable to you.
- Large Institutions – Traditional banks are typically the largest lenders in the country. They account for a significant portion of the money lent both commercially and to consumers. If you want to work with a bank that has a large presence in the industry, traditional banks are typically your best option.
- Highly Regulated – Traditional banks are the most regulated lenders in the United States. As consumer banks, they have to abide by strict rules put in place by federal regulatory bodies. If you’re looking to work with a lender that you know has to abide by certain rules, traditional bankers are often the best.
- Attached to Your Banker – Another great benefit is that you can often get a loan through your current banker. This means that you don’t have to work with a separate company to get the money that you want. It can make paying your payments much easier. Although it must be said that modern lenders have made it much easier to use different banks and loan providers in recent times.
Disadvantages of Personal Bank Loans
And while there are many advantages to getting a personal bank loan, there are also some drawbacks. It’s important to be aware of the negative aspects of personal bank loans. You don’t want to end up being unaware of potential issues you may face.
- Harder to Get – At the end of the day, traditional lenders prefer to work with people that have higher credit scores. If you’ve had problems getting finance in the past, you’ll probably struggle to get a personal bank loan.
- Longer Application – The application process for personal bank loans is also a bit longer than with some other lenders. You might have to bring in extensive documentation depending on the lender that you decide to work with.
- Longer Decision Process – Another drawback is that sometimes lenders will take days or weeks to approve a decision with personal bank loans. This is a huge problem for someone who might need money quickly.
The Transition Online
The banking industry has seen a lot of competition arising from the technological sector. There are now online lenders that have no physical presence whatsoever. These lenders are becoming increasingly popular with borrowers in the United States. Banks have recognized this threat and began to offer their own online services.
You’ll find that many traditional banks in the United States will now allow you to fill in an online application for personal bank loans. This can be a great way to receive some of the benefits that traditional lenders offer, without having to expose yourself to some of the drawbacks. Have a look at different traditional lenders with online presences if you do feel you want to apply for a personal bank loan.
Alternatives to Personal Bank Loans
If you’ve read through this guide and decided that you don’t want apply for personal bank loans, you’re probably wondering what your other options are. Fortunately, there are plenty of options available to you in the 21st Century. You can opt to work with online lenders that will provide you with a much quicker application process. On the other hand, these lenders won’t have the same customer service approach that many traditional personal bank loans have.
You can also look at completely different forms of finance. If you’re planning on paying off your debt extremely quickly, you could even opt for a credit card or other form of revolving credit. No matter what you do, avoid payday loans at all costs. These may seem like solid alternatives to get fast cash, but they can have seriously bad effects on your financial health. Payday loan companies often charge up to 1000% interest on loans that they offer to you. If you miss a payment, you could end up in a mountain of debt that you will never be able to escape.
Make sure that you are fully aware of any alternative financing you may be looking to get involved with. As mentioned previously, you should never approach a financial decision without being an expert on the type of agreement that you’re entering.
Personal banks loans continue to be one of the most popular forms of borrowing for several reasons. They provide consumers with access to capital and the opportunity to work with reputable, large lenders who have a firm understanding of the lending market. They’re a great opportunity to prove that you can be a responsible borrower. If you pay off your personal bank loan without any hiccups, it will do wonders for your credit score and help you build your financial future.
But choosing the right lender is often the hardest part of the entire personal bank loan process. You want to make sure that you work with someone who has a longstanding reputation for customer satisfaction – anything short of this should be a red flag. We’ve researched and compiled a list of the top lenders to work with. We want our readers to have a head start when it comes to choosing a lender to borrow from. Make sure to check out our homepage for more information.
Don’t hesitate to ask your lender as many questions as possible. It’s important that you fully understand the contract your signing. If you find anything confusing, talk to a customer service representative before you sign on the dotted line. Remember, there are tons of different lenders that you can choose from, there’s no real reason to sign up for something that you’re not comfortable with.
Know more about getting a personal loan from banks as well as bank loans in general and other related topics through this FAQ.
General Information on Personal Bank Loans
This section would consist mostly of clearing out definitions as well as recommending banks based on existing reviews and information.
What is a bank loan?
A bank loan is any loan product, whether secured or unsecured, that is granted by a bank.
What is an unsecured bank loan?
An unsecured bank loan is simply a loan from a bank that you can get without putting up a collateral that you may lose if you default.
Which banks offer personal loans?
Smaller banks and regional banks still offer them, but most big US banks have terminated that service.
Which banks offer secured loans?
A lot, actually. The best of them according to ValuePenguin are Wells Fargo, PNC Bank, TD Bank, BB&T Bank, and Fifth Third Bank.
Which banks use Experian for loans?
The Bank of America and Citibank primarily uses Experian for new credit accounts. However, they usually pull reports from the other two credit reporting agencies as well.
What is the best personal loan?
The best personal loan is what would be ideal in your situation, so it’s hard to pinpoint just one lender. For example, if you prioritize faster loan processing over low rates, the answer will differ from someone whose priorities may be different.
Where is the best place to get a personal loan?
Credit unions and alternative lenders are always great options as they accommodate those with lower credit scores and usually have better rates.
Which is the best bank for personal loan?
In most reviews of the best personal loans, traditional banks are outshined by online and alternative lenders. However, Wells Fargo is able to place in some of them.
Is a personal loan a good idea?
While rates would be relatively higher compared to a secured loan, a personal loan is still great for because you’re not at risk of losing a collateral. For as long as you have thought of how you’re going to use and pay back the money, it’s a good idea.
Are credit unions better than banks for loans?
Yes. Because credit unions are non-profit, they usually have lower rates for loans.
Qualifying and Getting a Personal Bank Loan
In this section, you’d get information on applying for personal bank loans and whether you’d qualify for one.
How do I apply for a bank loan?
First, identify the type of loan you wish to apply for. Then, inquire at your bank about the requirements, and if you meet their minimum requirements, submit all the necessary documentation.
How do I get a personal loan from a bank?
You would need a good to excellent credit score. Aside from that, they may also ask for other things such as proof of income.
How can I get a small personal loan?
Some banks lend a minimum of $5,000 for personal loans, so before anything else, make sure that your lender of choice is willing to grant the amount you need. Then, simply go through the application process.
How do bank loans work?
Except for lines of credit, you have a predetermined period on how long you’re going to pay back your loan. Then, depending on the agreement, it may be on a fixed or variable interest rate.
How long does it take to get a personal loan from a bank?
Banks generally have a longer processing time. So, it can easily take weeks or even months for you to get the loan amount.
How long does it take to get a loan approved?
It depends on the type of loan and where you’re going to get it. For example, payday loans can be granted within the same day, but home equity loans will take longer as the property itself will still be examined.
How do I get a bank loan with bad credit?
You may not be able to. However, you may opt for secured personal loans and other secured loan products.
How do I get a bank loan with no credit?
Your only choice would be the bank you already have a bank account with. However, even there, your odds aren’t so great.
How do I get a bank loan without collateral?
Opt bank loans that normally don’t require a collateral like personal loans. Of course, an excellent credit score would only raise your profile to your creditors.
Can I get a personal loan from a bank?
Of course, you always have the freedom to apply for one. However, your approval will depend on your creditworthiness, among other things.
Can I get a personal loan from any bank?
No. While the requirements bank have for personal loans are generally tougher, they’re not uniform. So, it’s possible for you to get a loan from one but not the other.
Can you get a personal loan with a credit score of 550?
Yes, but not from banks. You’d want to go to alternative lenders which cater to borrowers with bad credit.
Is it hard to get a personal loan from a credit union?
Compared to banks, it’s easy to get a personal loan from a credit union. However, as getting a loan there would require membership, it may be hard or even impossible for you to even apply for one.
Can you get 2 loans from the same bank?
Definitely. In fact, assuming that you pay on time, that can help raise your profile to the bank.
What is needed to qualify for a personal loan?
As most personal loans are unsecured, you would need an credit score of at least 700 if you’re applying for one at a bank. Alternative lenders are more lenient though in terms of credit rating requirements as they’d look at other factors to determine your creditworthiness.
How do I qualify for a bank loan?
You would need a strong profile, especially in terms of credit rating, length of credit history, as well as income. However, with secured loans, they won’t be as strict.
What age can you get a bank loan?
You can get a bank loan as soon as you’re able to enter into a contractual agreement which is usually when you’re 18. However, your odds of getting one is low because you haven’t built your credit history yet.
Can you get multiple loans from different banks?
Yes. For as long as you are approved for the loans, you can get them.
Do I need a bank account to get a loan?
If you’re applying for a bank loan, you’d need a bank account not necessarily as collateral but as proof that you actually have means to pay your debt.
How many bank loans can you have at once?
In theory, you can have as many bank loans as possible. However, if you get them all within a short period of time, it can be interpreted as financial instability.
Personal Loans from Different Banks
Here, your queries about personal loan products of different banks are discussed.
Does Bank of America do personal loans?
Unfortunately, the Bank of America no longer offers unsecured personal loans.
Does Chase bank do personal loans?
Even if you have impeccable credit, Chase Bank will not grant a personal loan.
How do I get a cash loan from Bank of America?
You can’t. Like most big U.S. banks, it is not possible to get a cash loan or any type of unsecured loan from the Bank of America anymore.
Loan Amount and Interest Concerns
Know how your loan amount and your interest payments are determined through the questions below:
How much will a bank loan me?
You loan amount will depend on the type of loan you’re applying for, on your collateral, and your income level, your credit score, and many other factors.
How much interest do banks charge on personal loans?
Assuming an excellent credit score, your bank will charge you anywhere from 7 to 12% APR on your personal loan. This will go even higher for lower scores.
How do banks calculate interest rates on loans?
Banks are not transparent on how they determine your interest rate. But more than your personal profile, banks look at existing market rates.
How do I calculate my bank loan repayment?
Multiply the total loan amount by the interest rate. Then, multiply the resulting number by the number of years you’d be repaying the loan. Lastly, add the loan amount and the total interest, and divide it by the number of payments there will be for the life of the loan.
How do I calculate my bank loan interest in Excel?
Use the PMT function where:
rate is the interest rate per repayment period. For example, if you pay per month, it will be the APR divided by 12.
Nper is the total number of repayments for the life of the loan.
Pv is the loan amount.
Can you extend a bank loan?
Yes. Although available only to long-term loans, refinancing allows you to extend the life of the loan in exchange for a higher interest payment.
With definitions, rates, and availability of personal loans covered already, you may still have some queries about the process which you still need answers for. Those that did not fit into the categories created are below:
Can a bank deny a loan after closing?
Yes, and the conditions by which they can do so are in the contract. Usually, taking more debt will qualify as grounds for rejection or even not showing additional proof of income.
Do banks call your employer for personal loans?
Yes. After you submit your loan application, the bank verifies the details you’ve put there. That’s why it’s a bad idea to lie on your personal loan application.
Is it better to pay a loan off early?
If there’s an early payment charge, it may not be. But if there’s not, paying off a loan early will leave you more room for other expenses.
Can I use CPF to pay a bank loan?
Yes. However, this applies to home loans and other property loans instead of personal loans.
Christine has a solid background in personal finance as she spent the last eight years working at one of the biggest banks in the US. She managed her own team of financial advisors that helped hundreds of people with their financing needs. Her innate understanding of different financial products and loans helped her move up the ranks quickly after graduating with a degree in Business Administration.