Compare Personal Loans vs. Online Installment Loans

If you qualify, a personal loan is often cheaper. The real question is whether you can get one. Many banks, credit unions, and online lenders let you check rates or prequalify without a hard credit pull - no impact on your credit score, and you'll have an answer in minutes. If you haven't checked yet, start there before comparing prices on a product you may not need.

If you've already been declined, or the bank doesn't offer the amount you need, the rest of this page helps you understand what the online installment option will cost and where the tradeoffs are.

Both are installment loans - monthly payments on a set schedule. The difference isn't the product structure, it's who's lending and at what price.

For example: a bank personal loan at 15% APR and an online installment loan at 100% APR on the same $2,000 balance for 12 months are drastically different in total cost. The personal loan might cost around $2,160 total; the online installment loan might cost around $3,100. That's roughly $900 more for the same amount borrowed over the same term. Your actual rates will depend on your credit, your lender, and your state.

The gap exists because online lenders accept borrowers that banks won't. Higher default rates mean higher prices - you're paying for access, not a better product. That's not a reason to avoid online installment loans, but it is a reason to check whether a personal loan is available to you first.

• Start with your existing bank or credit union. If you have an account, ask about a personal loan or credit-builder loan. Existing customers sometimes qualify at lower thresholds than new applicants. Most have online prequalification.
• Ask about PALs at a credit union. Payday Alternative Loans are federally regulated and capped at 28% APR. PALs I covers up to $1,000 with terms up to 6 months; PALs II covers up to $2,000 with terms up to 12 months. Not every credit union offers them.
• Try online prequalification. Several banks and online lenders let you check your rate with a soft pull. If the rate beats what online installment lenders offer in your state, take it.

If all three come back no - declined, amount too small, or funding too slow - an online installment loan is the practical option. Move on to comparing offers using the total of payments, not just the monthly number.

• Origination fees can close the gap on small loans. A personal loan at 12% APR with a 5% origination fee on a $1,500 loan adds $75 upfront. An online installment loan at a higher rate but no origination fee may cost less over a short term - run the total of payments on both before deciding.
• A longer term at a lower rate can cost more total. For example: a $2,000 personal loan at 15% APR for 36 months costs more in total interest than the same amount at 80% APR for 6 months from an online lender - the shorter term wins on total cost even at a much higher rate. If you can repay quickly, term length may matter more than rate.
• Delayed funding has a price. If the bank takes 5 business days to fund and you're facing a deadline - a bill, a repair, a payroll gap - the cost of waiting may outweigh the rate savings. Factor in late fees, penalties, or lost income from the delay, not just the loan's APR.