The 5 Best Personal Loans of December 2020

Editor’s Note: APRs listed in this article are up-to-date as of the time of publication. They may fluctuate (up or down) as the Fed rate changes. CNBC will update as changes are made public.

Personal loans are the fastest-growing debt category, increasing about 12% year-over-year since 2015. That’s due in part to the rise of fintech and peer-to-peer lending companies, which make accessing these loans cheaper and easier than ever before.

A form of installment credit, personal loans must be paid back in regular increments over a set period of time. Many see them as an affordable alternative to credit cards, because personal loans often have lower interest rates than credit cards, and consumers can use them to finance nearly every kind of expense, from home renovations to relocation costs. But that doesn’t mean they’re free money. Personal loan APRs average 9.34%, according to the Fed’s most recent data. Meanwhile, the average credit card interest rate is around 16.6%.

When compiling our list of the best personal loans, CNBC Select evaluated dozens of lenders. We looked at key factors like interest rates, fees, loan amounts and term lengths offered, plus other features including how your funds are distributed, autopay discounts, customer service and how fast you can get your funds. (Read more about our methodology below.)

CNBC Select’s picks for the top five personal loans:

Personal loan FAQs:

Best overall

LightStream Personal Loans

LightStream Personal Loans

On LightStream’s secure site

  • Annual Percentage Rate (APR)

    2.49% to 19.99% when you sign up for autopay

  • Loan purpose

    Debt consolidation, home improvement, auto financing, medical expenses, wedding and others

  • Loan amounts

  • Terms

  • Credit needed

  • Origination fee

  • Early payoff penalty

  • Late fee

Pros

  • Same-day funding available through ACH or wire transfer
  • Loan amounts up to $100,000
  • No origination fees, no early payoff fees, no late fees
  • LightStream plants a tree for every loan

Cons

  • Requires several years of credit history
  • No option to pay your creditors directly
  • Not available for student loans or business loans
  • No option for pre-approval on website (but available on some third-party lending platforms)

Who’s this for? LightStream, the online lending arm of SunTrust Bank, offers low-interest loans with flexible terms for people with good credit or higher. LightStream is known for providing loans for nearly every purpose except for higher education and small business. You could get a LightStream personal loan to buy a new car, remodel the bathroom, consolidate debt, cover medical expenses or pay for a wedding, according to the company’s website. 

You can receive your funds on the same day, if you apply on a banking business day, your application is approved and you electronically sign your loan agreement and verify your direct deposit banking account information by 2:30 p.m. ET.

LightStream offers the lowest APRs of any lender on this list, ranging from 2.49% to 19.99% APR when you sign up for autopay. Interest rates vary by loan purpose, and you can view all ranges on LightStream’s website before you apply. Auto loans start at 3.49% and debt consolidation loans currently begin at 5.95% APR. This is subject to change as the Fed rates fluctuate.

If you select the invoicing option for repayment, your APR will be 0.5% higher than if you sign up for autopay. The APR is fixed, which means your monthly payment will stay the same for the lifetime of the loan. Terms range from 24 to 144 months — the longest term option among the loans on our best-of list.

LightStream does not charge any origination fees, administration fees or early payoff fees.

Best for debt consolidation

Marcus by Goldman Sachs Personal Loans

Marcus by Goldman Sachs Personal Loans

On the Marcus by Goldman Sachs secure site

  • Annual Percentage Rate (APR)

    6.99% to 19.99% APR when you sign up for autopay

  • Loan purpose

    Debt consolidation, home improvement, wedding, moving and relocation or vacation

  • Loan amounts

  • Terms

  • Credit needed

  • Origination fee

  • Early payoff penalty

  • Late fee

Pros

  • No origination fees, no early payoff fees, no late fees
  • Will send direct payment to up to 10 creditors (for debt consolidation)

Cons

  • Does not accept joint applications and/or cosigners

Who’s this for? A Marcus by Goldman Sachs Personal Loan is a good choice if you’re looking for a no-fee personal loan to finance debt consolidation.

When you’re approved for a Marcus debt consolidation loan, the company will ask you if you’d like to use direct payments to send money to up to 10 creditors, which helps ensure that funds are used to directly wipe out your debt. To choose this option, you will need to provide your creditors’ account numbers and addresses, as well as the amount(s) you’d like paid. Marcus deposits anything that’s left over into your connected bank account.

There is no fee to use direct payments. You should continue making all required payments on your balance until you see your debt is paid off, even if you’ve already sent your loan money to a creditor. It may take as long as a billing cycle for the payments to be reflected on your account, but you don’t want to miss a payment by mistake and get hit with additional interest charges or late fees.

Marcus also offers personal loans for home improvement, weddings, vacations or a cross-country move. Borrowers can qualify to take out a fixed-rate loan up to $40,000. 

Marcus offers competitive APRs of 6.99% to 19.99% on its personal loans when you sign up for autopay. Term lengths vary from 36 to 72 months. It also offers a high-yield savings account with competitive APY, helping you both earn and save money where it counts.

Unlike LightStream, Marcus has a soft inquiry tool on its website, which allows you to look at possible loan options based on your credit report without impacting your credit score.

Best for refinancing high-interest debt

SoFi Personal Loans

SoFi Personal Loans

Information about SoFi Personal Loans has been collected independently by CNBC and has not been reviewed or provided by the company prior to publication.

  • Annual Percentage Rate (APR)

    5.99% to 18.28% when you sign up for autopay

  • Loan purpose

    Debt consolidation/refinancing, home improvement, relocation assistance or medical expenses

  • Loan amounts

  • Terms

  • Credit needed

  • Origination fee

  • Early payoff penalty

  • Late fee

Pros

  • No origination fees, no early payoff fees, no late fees
  • Unemployment protection if you lose your job
  • DACA recipients can apply with a creditworthy co-borrower who is a US Citizen/permanent resident by calling 877-936-2269
  • Can have more than one SoFi loan at a time (state-permiting) 
  • May accept offer of employment (to start within the next 90 days) as proof of income
  • Co-applicants may apply

Cons

  • Applicants who are U.S. visa-holders must have more than two years remaining on visa to be eligible
  • No co-signers allowed (co-applicants only)

Who’s this for? SoFi got its start refinancing student loans, but the company has since expended to offer personal loans up to $100,000 depending on creditworthiness, making it an ideal lender for when you need to refinance high-interest credit card debt.

If you have high-interest debt on one or more card, and you want to save money by refinancing to a lower APR, SoFi offers a simple sign-up and application process, plus a user-friendly app to manage your payments.

Another unique aspect of SoFi lending is that you can choose between variable or fixed APR, whereas most other personal loans come with a fixed interest rate. Variable rates can go up and down over the lifetime of your loan, which means you could potentially save if the APR goes down (but it’s important to remember that the APR can also go up). However, fixed rates guarantee you’ll have the same monthly payment for the duration of the loan’s term, which makes it easier to budget for repayment.

By setting up automatic electronic paymentsyou can earn a 0.25% discount on your APR. You can also set up online bill pay to SoFi through your bank, or you can send in a paper check.

Once you apply for and get approved for a SoFi personal loan, your funds should generally be available within a few days of signing your agreement. You can both apply for and manage your loan on SoFi’s mobile app.

While taking on a sizable loan can be nerve-wracking, SoFi offers some help if you lose your job: You can temporarily pause your monthly bill (with the option to make interest-only payments) while you look for new employment. You may still incur interest, but your payment history will remain unharmed. You can read more about SoFi’s Unemployment Protection program in its FAQ.

Best for smaller loans

PenFed Personal Loans

PenFed Personal Loans

Information about PenFed Credit Union Personal Loans has been collected independently by CNBC and has not been reviewed or provided by the bank prior to publication. PenFed is federally insured by the National Credit Union Administration.

  • Annual Percentage Rate (APR)

  • Loan purpose

    Debt consolidation, home improvement, medical expenses, auto financing and more

  • Loan amounts

  • Terms

  • Credit needed

  • Origination fee

  • Early payoff penalty

  • Late fee

Pros

  • Credit union membership available to anyone
  • Loans as low as $500
  • Can pick up a physical at a branch
  • May apply with a co-borrower

Cons

  • Funds come as a physical check
  • Must be a member to get funds (no membership needed to apply)
  • Must pay for expedited shipping to get your funds next day
  • Maximum loan amount of $20,000
  • Late fee of $29

Who’s this for? PenFed is a federal credit union that offers membership to the general public and provides a number of personal loan options for debt consolidation, home improvement, medical expenses, auto financing and more.

While most lenders have a $1,000 minimum for loans, you can get a $500 loan from PenFed with terms ranging from one to five years. You don’t need to be a member to apply, but you will need to sign up for a PenFed membership and keep $5 in a qualifying savings account to receive your funds.

While PenFed loans are a good option for smaller amounts, one drawback is that funds come in the form of a paper check. If there is a PenFed location near you, you can pick up your check directly from the bank. However, if you don’t live close to a branch, you have to pay for expedited shipping to get your check the next day.

APRs range from 6.49% to 17.99%. Not all applicants will qualify for the lowest rate, and there’s no discount for autopay.

Best for next-day funding 

Discover Personal Loans

Discover Personal Loans

Information about Discover Personal Loans has been collected independently by CNBC and has not been reviewed or provided by the bank prior to publication. Discover Bank USA is a Member FDIC.

  • Annual Percentage Rate (APR)

  • Loan purpose

    Debt consolidation, home improvement, wedding or vacation

  • Loan amounts

  • Terms

  • Credit needed

  • Origination fee

  • Early payoff penalty

  • Late fee

Pros

  • No origination fees, no early payoff fees
  • Same-day decision (in most cases)
  • Option to pay creditors directly
  • 7 different payment options from mailing a check to pay by phone or app

Cons

  • Late fee of $39
  • No autopay discount
  • No cosigners or joint applications

Who’s this for? Discover Personal Loans can be used for consolidating debt, home improvement, weddings and vacations. While there are no origination fees, Discover does charge a late fee of $39 if you fail to repay your loan on time each month.

Discover offers fixed-rate APRs that you lock in at 6.99% to 24.99% depending on creditworthiness. There’s no penalty for paying your loan off early or making extra payments in the same month to cut down on interest. 

If you’re getting a debt consolidation loan, Discover can pay your creditors directly. Once you’re approved for and accept your personal loan, you can link the credit card accounts so Discover will send the money directly. You just need to provide information such as account numbers, amount you’d like paid and payment address information.

Any money remaining after paying your creditors can be deposited directly into your preferred bank account.

You can receive your money as early as the next business day provided that your application was submitted without any errors (and the loan was funded on a weekday). Otherwise, your funds will take no later than a week. 

Personal loan FAQs:

1. How do personal loans work?

Personal loans are a form of installment credit that can be a more affordable way to finance the big expenses in your life. You can use a personal loan to fund a number of expenses, from debt consolidation to home renovations, weddings, travel and medical expenses.

Before taking out a loan, make sure you have a plan for how you will use it and pay it off. Ask yourself how much you need, how many months you need to repay it comfortably and how you plan to budget for the new monthly expense. (Learn more about what to consider when taking out a loan.)

Most loan terms range anywhere from 6 months to 7 years. The longer the term, the lower your monthly payments will be, but they usually also have higher interest rates, so it’s best to elect for the shortest term you can afford. When deciding on a loan term, consider how much you will end up paying in interest overall.

Once you’re approved for a personal loan, the cash is usually delivered directly to your checking account. However, if you opt for a debt consolidation loan, you can sometimes have your lender pay your credit card accounts directly. Any extra cash leftover will be deposited into your bank account.

Your monthly loan bill will include your installment payment plus interest charges. If you think you may want to pay off the loan earlier than planned, be sure to check if the lender charges an early payoff or prepayment penalty. Sometimes lenders charge a fee if you make extra payments to pay your debt down quicker, since they are losing out on that prospective interest. The fee could be a flat rate, a percentage of your loan amount or the rest of the interest you would have owed them. None of the lenders on our list have early payoff penalties.

Once you receive the money from your loan, you have to pay back the lender in monthly installments, usually starting within 30 days.

When your personal loan is paid off, the credit line is closed and you no longer have access to it.

2. What is a good interest rate on a personal loan?

Most personal loans come with fixed-rate APRs, so your monthly payment stays the same for the loan’s lifetime. In a few cases, you can take out a variable-rate personal loan. If you go that route, make sure you’re comfortable with your monthly payments changing if rates go up or down.

Personal loan APRs average 9.34%, according to the Fed’s most recent data. Meanwhile, the average credit card interest rate is around 16.6%. Given that the average rate of return in the stock market tends to be above 5% when adjusted for inflation, the best personal loan interest rates would be below 5%. That way, you know that you could still earn more that you’re paying in interest.

However, it’s not always easy to qualify for personal loans with interest rates lower than 5% APR. Your interest rate will be decided based on your credit score, credit history and income, as well as other factors like the loan’s size and term.

3. How is my personal loan rate decided?

4. What is a loan term?

The loan’s term is the length of time you have to pay off the loan. Terms are usually between six months and seven years. Typically, the longer the term, the smaller the monthly payments and the higher the interest rates. 

5. How big of a personal loan can I get?

Lenders offer a wide range of loan sizes, from $500 to $100,000. Before you apply, consider how much you can afford to make as a monthly payment, as you’ll have to pay back the full amount of the loan, plus interest.

6. How much do personal loans cost?

Some lenders charge origination, or sign-up, fees, but none of the loans on this list do. All personal loans charge interest, which you pay over the lifetime of the loan. The lenders on our list do not charge borrowers for paying off loans early, so you can save money on interest by making bigger payments and paying your loan off faster.

7. Common personal loan definitions you should know

Here are some common personal loan terms you need to know before applying.

Our methodology

To determine which personal loans are the best, CNBC Select analyzed dozens of U.S. personal loans offered by both online and brick-and-mortar banks, including large credit unions, that come with no origination or signup fees, fixed-rate APRs and flexible loan amounts and terms to suit an array of financing needs.

When narrowing down and ranking the best personal loans, we focused on the following features:

  • No origination or signup fee: None of the lenders on our best-of list charge borrowers an upfront fee for processing your loan.
  • Fixed-rate APR: Variable rates can go up and down over the lifetime of your loan. With a fixed rate APR, you lock in an interest rate for the duration of the loan’s term, which means your monthly payment won’t vary, making your budget easier to plan.
  • Flexible minimum and maximum loan amounts/terms: Each lender provides a variety of financing options that you can customize based on your monthly budget and how long you need to pay back your loan.
  • No early payoff penalties: The lenders on our list do not charge borrowers for paying off loans early.
  • Streamlined application process: We considered whether lenders offered same-day approval decisions and a fast online application process. 
  • Customer support: Every loan on our list provides customer service available via telephone, email or secure online messaging. We also opted for lenders with an online resource hub or advice center to help you educate yourself about the personal loan process and your finances.
  • Fund disbursement: The loans on our list deliver funds promptly through either electronic wire transfer to your checking account or in the form of a paper check. Some lenders (which we noted) offer the ability to pay your creditors directly.
  • Autopay discounts: We noted the lenders that reward you for enrolling in autopay by lowering your APR by 0.25% to 0.5%.
  • Creditor payment limits and loan sizes: The above lenders provide loans in an array of sizes, from $500 to $100,000. Each lender advertises its respective payment limits and loan sizes, and completing a preapproval process can give you an idea of what your interest rate and monthly payment would be for such an amount.

After reviewing the above features, we sorted our recommendations by best for overall financing needs, debt consolidation and refinancing, small loans and next-day funding.

Note that the rates and fee structures advertised for personal loans are subject to fluctuate in accordance with the Fed rate. However, once you accept your loan agreement, a fixed-rate APR will guarantee interest rate and monthly payment will remain consistent throughout the entire term of the loan. Your APR, monthly payment and loan amount depend on your credit history and creditworthiness. To take out a loan, lenders will conduct a hard credit inquiry and request a full application, which could require proof of income, identity verification, proof of address and more. 

Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the CNBC Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.

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