What is a bank loan?
A bank loan is an unsecured personal loan from a bank that you pay back in fixed, monthly installments. These loans come in a wide range of amounts — from $1,000 to $50,000, though some banks may lend up to $100,000 — and repayment terms of two to seven years.
Rates for personal loans from banks can start as low as 6%. Some banks require you to be an existing customer and offer perks for account holders, but not all.
How to get a loan from the bank
Check the bank’s loan criteria. Before you apply for a loan, familiarize yourself with the application requirements on the bank’s website or give the branch a call.
Pre-qualify, if possible. Some banks offer pre-qualification for a personal loan, which lets you check loan options without hurting your credit score. Pre-qualification is quick — complete a short application, undergo a soft credit pull and view your potential loan offers.
Submit your application. When you’re ready, submit a formal loan application. Required documents typically include proof of income and employment. You’ll also undergo a hard credit inquiry during this step, which temporarily knocks a few points off your score.
Get approved and funded. Approval can be instantaneous or take a few days, depending on the bank and if additional documentation is needed. Once approved, you’ll receive the loan documents, usually electronically, which you’ll sign and return to the lender. Funding time varies, but can be as early as same-day or up to a week.
Make a plan to pay back the loan. Once you receive the loan funds, it’s important to make a plan to manage your monthly payments, so you don’t fall behind, which can hurt your credit and result in late fees.
Bank personal loan rates
The average interest rate on a two-year personal loan from a bank is 12.49%, according to the most current data from the Federal Reserve.
As with most credit products, the annual percentage rate you receive on a personal loan — which includes interest and any fees — depends a lot on your credit score. The better your score, the lower your rate and the less interest you’ll pay over the life of the loan.
The interest rate also affects your total monthly payment, as does the term length. A longer-term means lower monthly payments, but you pay more interest over time.
Pros and cons of bank loans
While personal loans from banks are often structured similarly to online loans, getting and qualifying for one may be different. Here are a few pros and cons to consider:
Pros of bank loans
Customer benefits. Banks typically offer lower interest rates, higher borrowing amounts and additional perks, like a rate discount, to existing account holders.
Convenience. If you are an existing account holder, getting a personal loan at the same bank may make the process easier and help keep track of your money.
Better assistance. Customer service may be more robust at banks, especially if you can visit a brick-and-mortar location. You may even have the same contact person throughout the life of the loan.
Cons of bank loans
Limited pre-qualifying options. Not all banks offer the option to pre-qualify online, so you can’t see your prospective rates and terms before applying and submitting to a hard credit check.
Possible longer funding time. Funding can take longer compared to getting a loan from an online lender, though some banks offer same- or next-day funding.