Which is better: A Personal Loan With a Bank or Online Lender?

A Personal Loan With a Bank or Online Lender


While looking for a personal loan, you can choose between a personal loan from a bank or an online lender. Both have their perks; banks tend to offer better rates and are more secure while personal loans from online lenders are quicker and easier to get accepted for. Which would work for you depends entirely on your specific circumstances. If your credit score is bad or you don’t have a credit history, you can opt for easy online loans that won’t mind the low credit or zero credit history. However, if you have a decent credit score and already have an established relationship with a bank, you might get better terms from them.

To figure out which option would be best for you, there are multiple factors that you should consider. Your credit health, monthly income, and interest rates.

A personal loan from a bank vs an online lender

Both banks and online lenders are subject to industry regulations and government and have different terms and conditions. There are many key differences between the two that you should be aware of.

Personal loans from a bank are more regulated, which means the criteria to get accepted for one is pretty strict. Bank loans would require you to visit the bank in person multiple times to finalize the loan and they take more time to process everything too. As the process takes longer and has more strict conditions compared to online loans, banks usually offer lower interest rates as a consolation and offer special perks to people who already had a relationship with the bank.

Online lenders, on the other hand, have a much more lenient process, have a faster application process, and require less effort on your part. The entire process takes place online, so you don’t have to visit anyone. Online lenders don’t scrutinize applications as harshly as banks, so they also tend to have higher interest rates as compared to banks. The biggest benefit of an online personal loan is that you can apply for it from the convenience of your home and receive the loan money quickly. If you urgently need the money, online loans would be better for you.

Which option would be best for you?

Before settling on an option, there are numerous questions that you should ask yourself. It’s always advisable to shop around for the lowest interest rates while looking for a personal loan. You will also need to keep in mind your monthly income and how much of it you can afford to use on repayments. Here are some questions to consider before you make the final decision.

  • Are banks a better option for you?

A personal loan from a traditional bank may be best for you if you have a good credit score and already have an existing relationship with a bank. Members with pre-existing relationships could get additional benefits from the bank. If you are looking for more security, then banks may be a good option for you. Online loans are secure too but some people prefer brick-and-mortar banks to feel reassured and that’s completely understandable.

Banks have stricter policies and have a long processing time, if you need the money quickly then online lenders may be better for you. Banks also don’t allow anyone to pre-qualify for a personal loan while some online lenders will let you pre-qualify for loans. Hence, you won’t know exactly how much the monthly repayments will be until everything is settled and signed.

  • Are online lenders a better option for you?

If you aren’t confident about your credit score and credit history, online lenders would be the better option for you as compared to banks. Online lenders have a much faster processing time, some may even transfer the fund to you within 24 hours. So, if you need the money ASAP, online lenders are your best option.

The application process for online loans may seem daunting but online lenders offer numerous video tutorials and resources to help you understand. The process is definitely less tedious & rigorous as compared to that of traditional banks.


There are so many options available in the market for personal loans. Deciding which type of lender would be best for you is the first step in finding the best option. Depending on people’s incomes, credit scores, and financial needs, every person will have different preferences. What works best for you may not work for someone else. So before taking a final decision, analyze your situation thoroughly to figure out which one would be best for you.

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