Online or in person: How can you better take out a loan?



When you are looking for a personal loan, there are more and more options available to you. There is the traditional way – visit a loan officer at your bank – or the more modern option of an online lender that allows you to borrow almost overnight if you qualify.

Financial technology companies that offer personal loans online interfere with banks' lending business. According to a recent study by the Experian credit bureau, almost half (49.4%) of Fintechs came from unsecured loans in March 2019, compared to 22.4% in March 2015.

While some large national banks do not offer personal loans, others respond to competition with their own online offerings. PNC Bank, one of the largest banks in the United States, has taken out personal loans online this year to attract customers who could not be served at stationary locations, said Chris Dervan, senior vice president of personal loans.

"As in many industries, there has been a big trend towards digital, and this trend will continue," he says. "But we also see that there is still a large customer base that likes this personal touch."

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1. Would you pay for a personalized loan service?

One of the obvious differences between bank and online lenders is the personal exchange you can have with a physical bank.

If you value personal interaction and the security of knowing who is processing your loan, a bank may be right for you, says Eric Simonson, certified financial planner and owner of Abundo Wealth in Minneapolis.

"Some people just want to know that there is a … person who makes sure the credit goes smoothly for them," he says.

You may also have the option to negotiate a lower interest rate or qualify with a lower credit score when speaking to someone you already have a relationship with at a bank, Simonson says.

But the personal touch could be important, says Kyle Jackson, CFP from Oklahoma. He says brick-and-mortar banks tend to pass on the operating costs that online lenders don't have to consumers, which can result in higher interest rates or fees.

2. How quickly do you need the money?

If you need a loan quickly, online may be the way to go.

Online lenders – and traditional banks with an online option – can sometimes process an application and make decisions faster than banks that don't have an online presence, Jackson said.

Some of these lenders can finance the loan on the same day or the following business day that you apply for it.

Lenders with an online presence can also speed up their research process by publishing their interest rates, says Todd Nelson, senior vice president of LightStream, SunTrust Bank's online lending arm.

"If you have good credit, don't worry about getting approved," he says. "What interests you more is," Am I going to waste my time applying for a loan and getting an offer back that I don't want? "

3. Are you satisfied with the online application and management of a loan?

For an online loan application, you must electronically share information such as your social security number, education history, and bank account information, which may require lender access.

Watch out for fraudsters especially in these cases. According to Cove Financial Planning's Wisconsin CFP, Ben Smith, a physical bank is the safest option if you're not sure whether an online lender is legitimate.

According to Jackson, managing a loan online, which usually involves contacting the lender through a customer service representative, can be a challenge for people who are neither financially nor technologically savvy. If you are, the online experience may not go well together.

4. Where can you get the best loan?

According to Nelson, the most important considerations when buying a loan should be the interest rate, fees, and conditions, not whether it is an online lender or a bank branch.

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Simonson notes that a bank or credit union may be more willing to take the risk of lending to you if you have an undesirable loan or are looking for a loan for a non-traditional reason than at a large bank or online Lender would be the case.

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Annie Millerbernd is a writer at NerdWallet. Email:

The article online or in person: How better to take out a loan? originally released on NerdWallet.