How Do Bank Loans Work?

Bank loans work similarly to loans from other lenders, but often require good or excellent credit to qualify.
Ronita Choudhuri-Wade
Annie Millerbernd
By Annie Millerbernd and  Ronita Choudhuri-Wade 
Updated
Edited by Kim Lowe
How Do Bank Loans Work?

Many or all of the products featured here are from our partners who compensate us. This influences which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. Here is a list of our partners and here's how we make money.

Bank loans work similarly to unsecured personal loans from online lenders or credit unions: Upon receiving your loan application, the bank will review your credit scores, credit history, debt and income to determine your loan amount and rate. You receive the loan as a lump sum and can use the money for almost any reason. You pay it back in fixed monthly installments.

Banks typically offer loans from $1,000 to $50,000, with repayment terms of two to seven years. Personal loan annual percentage rates generally range from 6% to 36%. To get the best rate, compare bank loans with those from online lenders before you apply.

Personal loans from our partners

SoFi logo
Check Rate

on SoFi

SoFi

5.0

NerdWallet rating 
SoFi logo

5.0

NerdWallet rating 
APR 

8.99- 29.99%

Loan amount 

$5K- $100K

Check Rate

on SoFi

Avant logo
Check Rate

on Avant

Avant

4.0

NerdWallet rating 
Avant logo

4.0

NerdWallet rating 
APR 

9.95- 35.99%

Loan amount 

$2K- $35K

Check Rate

on Avant

BestEgg logo
Check Rate

on Best Egg

Best Egg

4.5

NerdWallet rating 
BestEgg logo

4.5

NerdWallet rating 
APR 

8.99- 35.99%

Loan amount 

$2K- $50K

Check Rate

on Best Egg

Who can get a personal loan from a bank?

Some banks only offer personal loans to their existing customers or to people in specific states. Other banks offer loans regardless of your account status or location. If you already have an account in good standing with a bank, you may receive a lower annual percentage rate or added features, like a rate discount, on a bank personal loan.

Banks typically require a borrower to have good or excellent credit (690 credit score or higher), multiple years of credit history and a low debt-to-income ratio to take out a personal loan.

Banks that offer personal loans

While some major banks like Capital One and Chase don’t offer personal loans, others do. Here are banks that offer personal loans.

  • Discover offers online bank loans to consumers in all states and Washington, D.C. Its loans have features that make them ideal for debt consolidation.

  • PNC Bank offers loans nationwide to all consumers, although existing customers receive the most perks, including a potential rate discount.

  • Santander offers personal loans in about 30 states to existing account holders or qualifying borrowers with an offer code.

  • TD Bank lends to borrowers, including non-customers, in 15 states and Washington, D.C. Loans are funded quickly.  

  • Truist Bank offers loans to excellent-credit borrowers in 17 states and Washington, D.C., and you don’t have to be an existing customer to apply. 

  • U.S. Bank personal loans are available in 26 states, including for non-customers. Existing customers may have an easier time qualifying and getting larger loans.

  • Wells Fargo offers loans in all states but only to existing customers. Its loans come with a wide range of amounts and repayment terms.

Lender

Minimum credit score

Loan amounts

APR range

Discover
NerdWallet rating 

on Discover's website

660.

$2,500 - $35,000.

7.99% - 24.99%.

PNC Bank Personal Loan
NerdWallet rating 
See my rates

on NerdWallet's secure website

Not disclosed.

$1,000 - $35,000.

7.49% - 30.49%.

Santander Personal Loan
NerdWallet rating 
See my rates

on NerdWallet's secure website

700.

$5,000 - $50,000.

6.99% - 24.99%.

TD Bank Personal Loan
NerdWallet rating 
See my rates

on NerdWallet's secure website

Not disclosed.

$2,000 - $50,000.

8.99% - 23.99%.

Truist Bank Personal Loan
NerdWallet rating 
See my rates

on NerdWallet's secure website

Not disclosed.

$3,500 - $50,000.

8.19% - 17.24%.

US Bank Simple Loan
See my rates

on NerdWallet's secure website

660.

$1,000 - $25,000.

8.24% - 21.49%.

Wells Fargo Personal Loan
NerdWallet rating 
See my rates

on NerdWallet's secure website

Not disclosed.

$3,000 - $100,000.

7.49% - 23.74%.

Small bank loans

If you’re looking for a smaller personal loan, some banks have fast-funding loans up to $1,000.

Bank of America, for example, offers Balance Assist, a small-dollar loan that allows checking account customers to borrow up to $500 for a $5 flat fee. Repayment is due in three equal monthly installments, and you can apply online and be funded within minutes.

U.S. Bank offers a similar product with its Simple Loan. This small-dollar loan is available to checking account customers in $100 increments, up to a max of $1,000. It costs $6 for every $100, and borrowers repay the loan in three monthly installments.

Wells Fargo offers Flex Loan, which is available only to pre-approved customers in the lender's mobile app. Borrowers can choose from two loan amounts — $250 or $500 — with a $12 or $20 fee, based on the loan amount. Repayment is due back over four monthly installments.

Small-dollar loans can help cover a one-time emergency expense or repair, but they’re not usually a good idea for repeat borrowing. Before applying for a small-dollar loan, make sure you can pay back the loan, and any fees, in the allotted time period.

How to get a personal loan from a bank

While some banks still require an in-person visit to apply or close a personal loan — especially if you’re a new customer — many banks offer online application and funding processes.

A first step that some banks offer is pre-qualification, which previews whether you qualify, how much you can borrow and what rate you can get. There is a soft credit check when you pre-qualify, so you can compare loan offers from multiple lenders without impacting your credit score. The best loan typically has the lowest APR and monthly payments that fit into your budget.

Some traditional banks don’t offer pre-qualification and instead require you to submit a formal loan application. This can trigger a hard credit pull, temporarily dropping your credit score by a few points.

Bank loan applications typically ask for personal details, like your Social Security number and contact information. You may also be asked to provide proof of employment and income. Any existing accounts you have with the bank will likely be considered as part of your application.

Once approved, funding can be as soon as the same or the next business day or may take up to one week.

How can I improve my chances of getting approved?

If you feel your credit score is too low to get the loan you want, there are a few steps you can take to help you qualify for a personal loan:

  • Check your credit report. Your credit score is one of the most important factors on a personal loan application. Check your credit report and resolve any mistakes that might be hurting your score. You can get a free credit report with NerdWallet or at AnnualCreditReport.com.   

  • Be consistent about on-time payments toward all of your debts. This will help improve your debt-to-income ratio and build up your payment history — a significant factor determining your credit score.

  • Apply only for the amount of money you need. Requesting more than you need means you’ll be making higher loan payments each month, which can strain your budget and ability to pay your debts.

  • Consider a co-applicant or secured loan. Adding a co-signer or co-borrower with a higher credit score and income can boost your approval chances. Some banks offer secured loans backed by a savings account or vehicle, which makes the loan less risky for the bank.

Alternatives to bank loans

Credit union personal loans often have features similar to bank loans, like low interest rates and flexible repayment terms, but can be an option for people with fair and bad credit scores. You’ll need to become a member of the credit union before applying for a personal loan.

Online personal loans are available to borrowers across the credit spectrum and are usually faster and more convenient than bank loans, though interest rates may be higher. Online lenders may charge an origination fee, but most let you pre-qualify for a loan. Many can approve and fund loans the same day you apply.

Comparing options? See if you pre-qualify for a personal loan - without affecting your credit score
Just answer a few questions to get personalized rate estimates from multiple lenders.

on NerdWallet

Get more smart money moves – straight to your inbox
Sign up and we’ll send you Nerdy articles about the money topics that matter most to you along with other ways to help you get more from your money.