In a NutshellIf you’re looking to make a large purchase or consolidate high-interest debt, you might consider getting a personal loan from an online lender. We’ve rounded up our picks for the best online loans for good credit, building credit, home improvements and customer-friendly features.
Choosing a personal loan among all the online lenders out there can be overwhelming.
That’s why we’ve put together this list of our picks for the best online lenders, including options for debt consolidation, home improvement, good credit and building credit.
- Best for good credit: SoFi
- Best for home improvement: LightStream
- Best for customer-friendly features: Discover
- Best for people building credit: Avant
- What you should know about online loans
Why SoFi stands out: SoFi offers competitive interest rates with no late fee or prepayment penalty. The company also has members-only perks and an “unemployment protection” feature.
- High eligibility requirements — SoFi doesn’t share specific eligibility requirements but says you may qualify if you have a “responsible financial history” and “strong monthly cash flow.” SoFi also says it looks at your financial history, credit scores and debt-to-income ratio during the application process.
- Competitive interest rates — SoFi offers competitive rates, especially if you’re among those with the best credit. It also offers a small rate discount if you opt for automatic payments.
- Unemployment protection — If you apply for SoFi’s unemployment protection program, the company may put your loan into forbearance (in three-month increments) while you’re recovering from a layoff — assuming the job loss wasn’t your fault. If you pause payments, the loan will continue to accrue interest.
- Members-only perks — If you have a SoFi personal loan and become a SoFi member, you’ll have access to extra perks. These include a small discount on other SoFi loans, career services and community events.
Why LightStream stands out: LightStream, a division of Truist, offers competitive interest rates when you enroll in autopay. Funds can be used for a variety of expenses, including home improvements. In some cases, LightStream may be willing to beat competitor interest rates under certain conditions. Check with the lender for details about its Rate Beat program.
- Flexible loan amounts and terms — LightStream offers personal loans from $5,000 to $100,000, which may be helpful for home improvement projects, small or large. Loan terms range from as little as two years to 12 years.
- Potentially quick funding — The lender says it’s possible to receive the money in your bank account on the same business day you apply. This could be handy if you need extra funds quickly.
- No fees or prepayment penalties — LightStream doesn’t charge any fees or prepayment penalties. You can also avoid appraisals or home equity requirements — which you may need for other loan options like a home equity loan or a home equity line of credit.
Why Discover stands out: Discover offers many customer-friendly features like multiple repayment terms, same-day decisions in some cases, an option to pay off debts directly and access to your FICO score.
- Good credit required — Discover doesn’t list its eligibility requirements on its website, but most people with Discover personal loans have credit scores of 660 or above, according to its 2022 public annual report filed. You’ll also need a minimum household income of $25,000.
- Competitive interest rates — Discover offers competitive interest rates, but it only offers the lowest rates to people with the best credit. Your credit history, application and loan term may also affect your interest rates.
- Multiple term options — Discover offers a range of term options: 36, 48, 60, 72 and 84 months.
- Direct payments to consolidate debt — Discover can make payments to other accounts to pay off debt on your behalf.
Why Avant stands out: Avant may be a good option if you’re struggling to qualify for personal loans with other lenders. You can complete the process online and may get a quick decision.
- Qualify with less-than-perfect credit — Avant says that most of its personal loan customers have credit scores between 600 and 700, so you probably don’t need squeaky-clean credit reports to qualify.
- Higher interest rates — A trade-off for less stringent credit requirements can be higher interest rates. Avant’s rates may not be competitive compared to other lenders.
- Expect more fees — Avant charges an administration fee of up to 4.75%. The company also charges late payment and insufficient funds fees.
- Application to prequalify — If you’re worried that applying will affect your credit, Avant lets you apply for prequalification and check your potential loan offers with a soft inquiry that won’t hurt your credit scores.
What you should know about online loans
There are many reasons to apply for a personal loan with an online lender. You may want to consolidate high-interest debt on credit cards, or you may want to finance costly home improvements. Either way, you’ll want to make sure to apply for an online loan with monthly payments you can afford.
Consolidate high-interest debt
If you’re wrestling with high-interest debt, you may feel desperate for relief. It may be possible to lock in a lower interest rate with a debt-consolidation loan. The goal is to pay off multiple accounts and shift to one manageable monthly payment.
You need to be careful, though. Even with a lower interest rate, you may end up paying more in interest over the life of your new loan if you go with a longer term. You also may have to pay fees, which can chip away at any savings.
Pay for home improvements
If you need money to pay for home improvements, you have several options, including home equity loans, HELOCs and online loans. One of the perks of an unsecured personal loan is you don’t have to use your home as collateral. That’s important if you feel uneasy putting your home on the line. The downside is unsecured loans may have higher interest rates.
Personal loans from online lenders may have shorter terms than home equity loans or HELOCs, so you’ll want to make sure you can comfortably afford the monthly payments. You should also watch for origination fees, prepayment penalties and late fees.
How we picked these loans
We reviewed more than a dozen online loans from a variety of lenders to choose our favorite personal loans from online lenders. We considered eligibility requirements, interest rates, fees, loan amounts and term options. We also looked at the application process, the ability to apply for prequalification with a soft credit inquiry, direct payments to creditors and other customer-friendly perks.