When is an online personal loan better than a bank personal loan

March 21, 2018
Online personal loans come in different forms. Banks and credit unions offer unsecured loans, which they sometimes refer to as “signature loans.” Online lenders provide online personal loans that do not require a complete credit check. Many credit card companies have bank-like personal loans as well.
When is an online personal loan better than a bank personal loan

Which option is the best when you need to borrow money? It depends on your specific situation. You have to ask yourself some questions like:

  • How quickly do I need this money?
  • How much do I need to borrow?
  • What is my credit score?
  • How soon can I pay off the loan?

Let’s take a closer look at these variables.


If you need money quickly, an online personal loan is the best option. These loans only take a day or so from application to acceptance to deposit. You can have your money quickly. Banks and other lenders may be able to approve your loan fast, but they may take longer to decide the actual terms and deposit the money in your bank. Often, these loans will take several days to several weeks between application and the borrower getting their money.


Many banks have loan minimums that exceed $1,000. This means, for example, that you must borrow at least $1,000, even if you only need $500. Online personal loans have much lower minimums, and many have no minimums at all. If you just need $500, then you can borrow exactly $500.

For more significant amounts, bank loans are usually a better option, especially if you can get some secured credit. However, for smaller amounts, online personal loans will almost always be the best option because you can borrow precisely the amount that you need.

Credit score

This is one of the most significant differences between online personal loans and bank personal loans. Online lenders do not usually look at your credit score. Instead, they use your pay stubs and bank account balances to judge your ability to repay the loan. This means that online personal loans are a good option if you have a low credit score. Banks will almost always do a complete credit check. You might not be disqualified for an average credit score, but you may have to pay a higher interest rate. If your credit score is below 650, you may not qualify for a personal loan from the bank.


Most personal loans will give you the terms upfront. You will know exactly how much you need to pay each month and how long you will have to make payments. You should be sure that you can cover the monthly payments. This is less of an issue with shorter-term loans (such as online personal loans), but very important for more extended loans.