By Mike Cetera
WWR Article Summary (tl;dr) Mike Cetera from Bankrate.com takes a look at the pros and cons of multiple financing options currently available to consumers.
If you’re looking for a personal loan, you have options beyond the online financial startups getting much of the publicity these days. Before you apply, look for the best offers from these three types of lenders:
Banks long were the leaders in personal loan originations. As recently as 2013, banks accounted for 40 percent of all personal loan originations, according to data from the credit bureau TransUnion. Newer players have cut into several banks’ business, but banks are still lending tens of billions of dollars annually.
Here’s what you need to know about borrowing from a bank:
-Banks in general demand higher credit scores from borrowers than other lenders. About two-thirds of all bank personal loans go to borrowers who have a credit score of at least 661, according to TransUnion.
-Although many banks don’t disclose credit score requirements, some do. TD Bank, for example, says it will issue personal loans only to borrowers with a credit score of 680 or above.
-Since banks lend to borrowers who are seen as less risky, they also tend to issue larger loans on average.
Credit unions issue fewer loans than banks but still are significant players. In 2014, credit unions originated a bit less than 30 percent of all personal loans. Membership is one key difference between banks and credit unions. You have to be a member of a credit union to qualify for a loan.
Here’s what you need to know about borrowing from a credit union:
-Credit unions are much more likely to issue a loan to someone with damaged credit. More than half of all credit union personal loans go to borrowers with credit scores of 660 or below, according to TransUnion. Nearly one-quarter are issued to subprime borrowers, people with credit scores of 600 or less.