How Do Bank Loans Work?

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

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Bank loans work similarly to personal loans you get from online lenders: After you apply, the bank will review your credit score, credit history, debt and income to determine how much money to loan you and what annual percentage rate you qualify for.

Once you get the loan, you’ll pay it back in monthly installments. Bank loan repayment terms range from about one to seven years.

To get the best rate you qualify for, be sure to compare bank loans before you apply.

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.

Who can get a loan from a bank?

Some banks offer personal loans to their existing customers only. Others will accept loan applications from anyone. If you already have an account in good standing with a bank, you may receive a lower APR or added features, like a rate discount, on a bank 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.

If you don’t think you’ll qualify for a bank loan, look for quick ways to improve your credit or consider a co-signed, joint or secured loan.

Banks offering personal loans

Not all major banks offer personal loans. You can't get a personal loan from Bank of America, Capital One or Chase, for example. Here are banks that offer personal loans and some details about who they may be best for.

Discover, an online bank, offers loans that are ideal for debt consolidation, due to the lender’s low rates, flexible payment terms and direct payments to creditors. It also has a unique 30-day money-back guarantee, in case you need to cancel the loan for any reason. 

LightStream, another online bank, offers personal loans with low rates and zero fees. Its many consumer-friendly features include a rate-beat program, which will match other lenders’ interest rates, and special perks for borrowers looking to finance a home improvement project.

PNC Bank doesn't require you to have an account with the bank to qualify for a personal loan, though existing customers receive the most perks, including a potential rate discount. PNC also offers joint loans, which may help borrowers qualify for a larger loan or lower interest rate.

TD Bank lends to borrowers in 15 states and Washington, D.C., and personal loans are available to non-customers. It also funds loans quickly. Borrowers can receive the money in their account the next business day after being approved. 

Truist Bank lends in 17 states and Washington, D.C., and you don’t have to be an existing customer to apply. According to the lender, most loan decisions happen in 15 minutes, and if it’s a business banking day, borrowers can receive the money in their account that same day.

U.S. Bank personal loans are available in 26 states, including for non-customers. Existing customers may have an easier time qualifying for a loan and will have access to larger loan amounts, longer repayment terms and faster funding.

Wells Fargo’s personal loans come in a notably wide range of amounts and repayment terms, making this loan easily customizable to most borrowers’ needs. If you’re not an existing Wells Fargo customer, you’ll need to visit a branch to apply, while current customers can apply online.


Minimum credit score

Loan amounts

APR range

NerdWallet rating 

on Discover's website


$2,500 - $35,000.

7.99% - 24.99%.

NerdWallet rating 

on LightStream's website


$5,000 - $100,000.

7.99% - 25.49%.

PNC Bank Personal Loan
NerdWallet rating 
See my rates

on NerdWallet's secure website

Not disclosed.

$1,000 - $35,000.

7.49% - 30.49%.

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


$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%.

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.

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 back 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 pay back the loan in three monthly installments. 

Wells Fargo offers Flex Loan, 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.

Finally, checking account customers at Truist Bank can apply for the Ready Now Loan, which comes in $100 increments up to $1,000, with a fee of $5 per $100 borrowed. It has the longest repayment term at six months.

Small-dollar loans can help you 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.

Uses for a bank loan

Bank loans can be used for almost any reason. Common uses include home improvement projects and debt consolidation. Some lenders allow you to use a personal loan to refinance an existing loan. Refinancing can make sense if the new loan has a lower rate than the loan you already have.

Is getting a personal loan a good idea?

Depending on what you plan to use it for, a personal loan can be a good idea if it can help you reach your financial goals without putting you in financial jeopardy. It can also build your credit history, provided you make payments on time.

Having different types of credit — including revolving credit like credit cards, as well as installment accounts like personal loans — can boost your perceived creditworthiness in the eyes of lenders.

How can I improve my chances of getting approved?

If you’re worried 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 regularly. You can get your credit reports for free at If you see any errors on your reports, dispute them in writing or by phone.

  • Be consistent about making on-time payments toward all of your debts. This will help improve your debt-to-income ratio as well as build up your payment history — the largest factor determining your credit score.

  • Apply only for the amount of money that 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-signer or co-borrower. If you don’t think you’ll be approved for the loan you want from the lender of your choice, adding a co-signer or co-borrower with a higher credit score and income can boost your approval chances.

Applying for a loan from a bank

Some banks allow you to pre-qualify for a loan to find out how much you can borrow and what rate you qualify for.

Some traditional banks don’t offer pre-qualification and instead require you to submit an application, which triggers a hard credit pull and can temporarily drop your credit score by a few points.

Once you’ve compared banks and decided which you’d like to borrow from, you’ll fill out an application. Many applications are online, though some banks may require an in-person visit to apply or close the loan, especially if you’re not an existing customer.

Bank loan applications typically ask for personal details, like your Social Security number, proof of identification 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 you’re approved, funding can be as soon as the same or the next business day, or may take up to one week.

Alternatives to bank loans

Credit union personal loans often have similar features as bank loans, like low interest rates and flexible repayment terms, but can be an option for people with fair and poor credit scores (a 690 credit score or lower). 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 typically charge an origination fee, but most let you pre-qualify for a loan and many can approve and fund loans the same day you apply. 

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.
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