How to Qualify and Apply for a Bank Loan
Step-by-Step Guide:
- Loan Purpose: Think about what you want to use the funds for.
- Check your Credit Report: Check your credit score and resolve any negative entries.
- Evaluate your finances: See if your income can cover the loan payment without affecting your other bills.
- Compare lenders: View interest rates, fees and loan requirements of different lenders.
- Select a lender: Make your choice based on your specific needs and the best terms offered.
- Submit Application: Submit required documents such as tax returns and pay stubs.
- Waiting for Approval: Processing time varies from 1 day to 1 week.
- Receiving Funds: Approved funds are typically sent within 5 business days.
Average APR by Credit Quality
| Credit Quality | Average APR | Average Length (Months) | Average Amount ($) |
|---|---|---|---|
| Excellent (720+) | 21.23% | 48 | 17,674 |
| Good (660-719) | 26.01% | 48 | 13,770 |
| Mediocre (620-659) | 30.91% | 49 | 7,838 |
| Poor (<620) | 30.94% | 44 | 9,550 |
Key Insights: Your credit score plays a major role in determining your loan interest rate, term, and amount.
Comparing Bank Loans
Factors to Consider:
- Credit Requirements: Minimum credit standards.
- APR: Total cost of credit.
- Fee: Late or prepayment fee.
- Co-signer: Whether or not you have a co-signer or co-applicant.
- Credit Limits: Credit allowed.
- Availability: Lender’s area of operation.
Overall Best: US Bank
Details:
- APR Range: 8.74% – 24.99%
- Loan Amount: $1,000 – $50,000
- Loan Term: 12 to 84 months
| Cost Breakdown | Amount ($) |
|---|---|
| Minimum Credit | 1,000 |
| Maximum Credit | 50,000 |
| Late Payment Fee | 25 |
Advantages: No limits on credit usage, 0.50% autopayment discount, co-applicant allowed, fast financing.
Cons: Limited branch locations and no cosigners allowed, resulting in fewer benefits for non-customers.
Key Takeaways: U.S. Bank offers competitive pricing and terms, especially for existing customers.
Best for Debt Consolidation: Discover
Details:
- APR Range: 7.99% – 24.99%
- Amount Loaned: 2,500 – 40,000 $
- Loan Terms: 36 – 84 months
| Cost Breakdown | Amount ($) |
|---|---|
| Minimum Loan | 2,500 |
| 40,000 | |
| Late Payment Fees | 39 |
Advantages: Low minimum APR, low-income requirements, and few credit usage restrictions.
Cons: High maximum APR, no automatic interest discounts, no cosigner.
Key Takeaways: Discover is a great choice for debt consolidation with low interest rates and direct payments to creditors.
Best for Fast Financing: Citibank
Details:
- APR Range: 11.49% – 20.49%
- Loan Amount: $2,000 – $30,000
- Loan Terms: 12 – 60 months
| Cost Breakdown | Amount ($) |
|---|---|
| Minimum Loan | 2,000 |
| Maximum Loan | 30,000 |
| Late Payment Fees | None |
Advantages: Fast financing, 0.50% interest rate discount with autopay, No fees.
Cons: Low loan limits, no cosigners, and below average customer satisfaction.
Key Takeaways: With same-day funding options, Citibank is a great choice for those who need money fast.
Best for American Express Cardholders: American Express
Details:
- APR Range: 5.91% – 19.97%
- Amount Loaned: $3,500 – $40,000
- Loan Term: 12 to 60 months
| Cost Breakdown | Amount ($) |
|---|---|
| Minimum Credit | 3,500 |
| Maximum Credit | 40,000 |
| Late Payment Fees | None |
Advantages: Low APR, no processing or prepayment fees, high customer satisfaction.
Cons: Requires Amex cardholder, credit usage limits, long funding period.
Key Takeaways: American Express offers great rates to its cardmembers with competitive interest rates and no fees.
Best for Large Loan Amounts: Wells Fargo
Details:
- APR Range: 7.49% – 23.24%
- Loan Amount: 3,000 – $100,000
- Loan Term: 12 to 84 months
| Cost Breakdown | Amount ($) |
|---|---|
| Minimum Loan Amount | 3,000 |
| Loan Limit | 100,000 |
| Late Payment Fee | 39 |
Advantages: High loan limits, same-day financing, no fees.
Cons: You must be a Wells Fargo customer, there are some spending restrictions, and no co-signers.
Key Takeaways: Wells Fargo is a great choice for borrowers who need a large loan amount with flexible terms.
Final Thoughts
When choosing a bank for a personal loan, consider your credit score, the purpose of the loan, and the specific terms each lender offers. While U.S. Bank stands out for having the best overall rates and terms, other major banks like Discover, Citibank, American Express, and Wells Fargo can also accommodate your specific needs. Always compare offers and choose the one that best suits your financial situation and goals.