If you’re struggling with credit card debt or need to borrow for a cash infusion, a personal loan might come in handy. It can help you streamline the payoff process and get your finances back under control.
Here’s everything you need to know about personal loans:
- What is a personal loan?
- How to apply for a personal loan
- 18 best personal loan lenders
- How to choose the best lender
- Average interest rates by credit rating
- Pros, cons of personal loans
- Types of personal loans, their uses
- Frequently asked questions
What is a personal loan?
A personal loan combines multiple unsecured debts, like credit cards and medical bills into a single loan with one fixed monthly payment. As long as you lock in a lower interest rate than the rates you’re currently paying on your other debts, you’ll save money. Plus you can potentially pay off your debt faster.
How to apply for a personal loan
Before you apply for a personal loan, you’ll want to take the following steps:
Determine how much you need
First, think about how much money you need to borrow based on your goals. While it may be tempting to apply for more, doing so can make it harder to get approved. It can also steer you into a cycle of debt.
Check your credit score
It’s important to know where you stand credit-wise. This way you’ll have an idea of what types of loans you might be eligible for.
You can usually check your FICO score for free through your bank, credit union, or a free credit monitoring site. Another option is to pull your credit reports for free from AnnualCreditReport.com. If you notice any errors, dispute them with the appropriate bureau.
Get prequalified
By prequalifying, you can find out if you’re likely to qualify for a personal loan, and what interest rates and repayment terms you might be offered. Prequalify with at least a few lenders so you can easily compare your options. Note that doing so won’t hurt your credit as most lenders do soft pulls during this stage, rather than hard inquiries.
Compare rates and loan terms
Once you’ve prequalified, it’s time to explore all your options. Compare rates, terms, fees, and unique features. This way you can find the right loan for your unique budget and needs.
Complete the application process
When you find a lender that works for you, you can move forward with the application process. In most cases, you can apply online in just a few minutes. Be prepared to provide basic information like your name, address, and Social Security number. You might also have to submit documents such as your pay stubs and tax forms to verify your income.
18 best personal loan lenders
1. Avant
Avant is an online lender that strives to improve the borrowing experience for the middle class. The lender has provided funding to more than 2 million borrowers. Avant’s personal loans are accessible to borrowers with lower credit scores and, if approved, funds can be deposited into your account as quickly as the next business day.
Avant might be a solid choice if you need to cover a small expense, with loan amounts that start at $2,000 in most states. You can also manage your loan using Avant’s mobile app. However, Avant charges fees, and it may not be available in your state.
- Interest rates: 9.95% to 35.99%; fixed
- Loan amounts: $2,000 to $35,000; minimum of $6,400 in Massachusetts
- Loan terms: 1 to 5 years
- Minimum credit score: 580
- Loan types: Emergency, debt consolidation, medical, home improvement; secured and unsecured
- Funding time: As soon as the next business day after approval
- Eligibility: Must be at least 18 years old (19 if you live in Alabama); must have a personal bank or credit union account; must be able to provide proof of income and identity; must not live in HI, MA, ME, NY, VT, or WV; must have a monthly income of at least $1,200
- Fees: Administration fee of up to 4.75%; late fee of $25; returned payment fee of $15
- Cosigner acceptance: No
- BBB rating: A
Pros:
- Fast funding
- Wide range of repayment terms
- No prepayment penalties
- Convenient mobile app
Cons:
- Charges an administration fee
- Low maximum loan amount
- Not available in all states
- Doesn’t accept cosigners
- Doesn’t disclose many eligibility requirements on website
- Doesn’t offer discounts
2. Axos Bank
Axos Bank offers may be right for you if you need to borrow a large amount of money. The lender also offers flexibility — you can move your monthly payment due date by up to 10 days if you need to.
You can use an Axos Bank loan for nearly any purpose, though the lender prohibits the use of funds for investing, post-secondary education, and short-term real estate bridge financing. You’ll also need a high credit score to qualify — 700 or above — and at least four years of good credit history.
- Interest rates: 7.99% to 14.99%; fixed
- Loan amounts: $5,000 to $50,000
- Loan terms: 3 to 6 years
- Minimum credit score: 700
- Loan types: Debt consolidation, credit card refinancing, home improvement, business, medical, vacation; unsecured
- Funding time: As soon as 2 days after signing loan agreement
- Eligibility: Must have verifiable income; must have at least 4 years of good credit history
- Fees: Origination fee of 1% to 2% of loan amount; late fee of $15; insufficient funds fee of $25; no prepayment penalties
- Cosigner acceptance: No
- BBB rating: A+
Pros:
- Wide range of loan amounts
- Ability to adjust payment due date
- No prepayment penalties
Cons:
- High minimum loan amount
- Charges fees
- High minimum credit score
- Doesn’t accept cosigners
- Doesn’t offer discounts
3. Best Egg
Best Egg offers unsecured and secured personal loans that are accessible to borrowers with fair credit. If you qualify, you can receive funds as soon as the next business day. The direct lender might be a fit if you need to consolidate debt — if you allow Best Egg to send funds directly to your creditors, you may qualify for a lower rate.
However, loans for Best Egg aren’t available in all states. The direct lender also charges an origination fee that can be high, and Best Egg has limited options for repayment terms.
- Interest rates: 8.99% to 35.99%; fixed
- Loan amounts: $2,000 to $35,000 (up to $50,000 depending on your state, and in special circumstances); $6,500 minimum in MA; $5,000 minimum in OH; $3,000 minimum in GA
- Loan terms: 3 to 5 years
- Minimum credit score: 640
- Loan types: Debt consolidation, moving, adoption, credit card refinancing, home improvement, vacation; secured and unsecured
- Funding time: As soon as the next business day
- Eligibility: Must be a U.S. citizen or permanent resident; must be at least 18 (or the legal age to accept a loan in your state); must have verifiable checking account with a routing number; must have a valid email; must have physical address; must not live in DC, IA, VT, or WV
- Fees: Origination fee of 0.99% to 8.99% of the loan amount; returned payment fee of $15; no prepayment penalties
- Cosigner acceptance: No
- BBB rating: A+
Pros:
- Fast funding
- Wide range of loan amounts
- No prepayment penalties
- Offers direct pay discount
Cons:
- High minimum loan amount in some states
- Few options for repayment terms
- Charges fees
- Not available in all states
- Doesn’t accept cosigners
4. Discover
Discover offers personal loans for borrowers with fair to excellent credit. Loan amounts range from $2,500 to $40,000, and the lender has flexible repayment terms.
Discover doesn’t charge origination or prepayment fees, which can make a loan more affordable. In addition, Discover offers free access to your FICO credit score and other credit report information.
- Interest rates: 6.99% to 24.99%; fixed
- Loan amounts: $2,500 to $40,000
- Loan terms: 3 to 7 years
- Minimum credit score: 660
- Loan types: Debt consolidation, home improvement, medical expenses, vacation funding, wedding financing, financial emergencies, auto expenses, pet emergencies, small business, and more
- Funding time: As soon as 1 business day after loan acceptance
- Eligibility: Be a U.S. citizen or permanent resident; be at least 18 years of age; have a minimum individual or household income of at least $25,000
- Fees: Late fee of $39; no origination, application, or prepayment fees
- Cosigner acceptance: No
- BBB rating: A+
Pros:
- No origination fee or prepayment penalty
- Long repayment terms
- Fast loan funding
Cons:
- Doesn’t accept cosigners or co-borrowers
- Requires at least fair credit
- No rate discounts
5. Achieve (formerly FreedomPlus)
Achieve has loaned more than $7.5 billion to over 400,000 borrowers. With a minimum credit score of 620 for personal loans, Achieve is an accessible option if you have fair credit. The lender may be a good choice if you prefer working with a loan consultant who can customize your loan, though Achieve also allows you to complete the loan application process online.
Achieve also offers unique rate discounts — you may qualify for a lower rate if you apply with a co-borrower, show proof of retirement funds, or allow Achieve to pay your creditors directly when you consolidate debt. However, the lender has a high minimum loan amount, so it’s not ideal if you only need a small loan. In addition, Achieve doesn’t offer personal loans in every state, and it charges an origination fee.
- Interest rates: 7.99% to 35.99%; fixed
- Loan amounts: $5,000 to $50,000
- Loan terms: 2 to 5 years
- Minimum credit score: 620
- Loan types: Debt consolidation, credit card refinance, home improvement, vacation, medical, wedding, moving, large purchase; unsecured
- Funding time: As soon as 1 to 3 days after approval
- Eligibility: Must have an annual minimum income of $80,000; must not live in CO, CT, HI, KS, ND, NV, VT, WI, WV, or WY
- Fees: Origination fee of 1.99% to 5.99%; no prepayment penalties
- Cosigner acceptance: No; accepts co-borrowers
- BBB rating: A+
Pros:
- Wide range of loan amounts
- Fast funding
- Accepts co-borrowers
- No prepayment penalties
- Offers rate discounts
Cons:
- High minimum loan amount
- Charges an origination fee
- Not available in all states
6. Happy Money
Happy Money offers a personal loan specifically designed to help you repay credit card debt. You can apply for what it calls the The Payoff Loan — once you’re approved, you can either have the money deposited into your bank account or applied directly to your credit cards.
The Payoff Loan comes in amounts ranging from $5,000 to $40,000, with terms spanning two to five years. You may qualify with fair credit, depending on your debt-to-income ratio and your credit history.
- Interest rates: 10.50% to 29.99%; fixed
- Loan amounts: $5,000 to $40,000; minimum $5,100 in NM and $6,100 in MD
- Loan terms: 2 to 5 years
- Minimum credit score: 640
- Loan types: Credit card debt consolidation
- Funding time: 3 to 6 business days after signing loan documents
- Eligibility: Be at least 18 years old; have a valid Social Security number; have a valid checking account; have zero delinquencies; have at least 3 years of established credit; not available in MA or NV
- Fees: Origination fee of 0% to 5%; no prepayment or late fees
- Cosigner acceptance: No
- BBB rating: A+
Pros:
- Option to pay off your credit card issuers directly
- No late fees or prepayment penalty
- Willing to work with borrowers facing financial hardship
Cons:
- Charges an origination fee
- Long approval and funding times
- Not available in MA, NV
- Requires at least fair credit
- No rate discounts
7. LendingClub
LendingClub could be a worthy option if you want to apply for a personal loan with a co-borrower. Adding a co-borrower to your application can improve your chances of approval, especially if you don’t have the best credit.
LendingClub also offers a grace period for late payments — you have 15 days to make your payment before being charged a late fee. On the downside, funding may take a bit longer with LendingClub, as it can take up to a week to receive your loan funds after you’ve been approved.
- Interest rates: 9.57% to 36.00%; fixed
- Loan amounts: $1,000 to $40,000
- Loan terms: 3 to 5 years
- Minimum credit score: No minimum credit score
- Loan types: Debt consolidation, home repairs, medical bills, and more
- Funding time: 2 to 7 business days after approval
- Eligibility: Be a U.S. citizen or resident; be at least 18 years old; have a verifiable bank account
- Fees: Origination fee of 3% to 6%; no prepayment penalties; late fees may apply
- Cosigner acceptance: No; accepts co-borrowers
- BBB rating: A
Pros:
- No minimum credit score requirement
- May be approved within a few hours
- Allows joint loans
- Low minimum loan amount
- Late payment grace period
Cons:
- Charges an origination fee
- Doesn’t accept cosigners
- Few repayment term options
- Relatively longer time to funding
8. LendingPoint
LendingPoint has provided over $8 billion in loans since 2015. The lender considers other factors beyond your credit score when determining whether you qualify. LendingPoint’s mobile app also has free tools like credit score monitoring and budget tracking.
However, LendingPoint may take up to three business days to approve your application, and it doesn’t offer loans to borrowers in Nevada and West Virginia.
- Interest rates: 7.99% to 35.99%; fixed
- Loan amounts: $2,000 to $36,500
- Loan terms: 2 to 6 years
- Minimum credit score: No minimum credit score
- Loan types: Debt consolidation, medical expenses, vehicle repairs, home improvements, weddings, and more
- Funding time: As soon as 1 business day after loan approval
- Eligibility: Be at least 18 years of age; provide a U.S. government-issued photo ID; have a Social Security number; have a minimum annual income of $35,000; have a verifiable bank account; not available in NV or WV
- Fees: Origination fee of 0% to 8% in some states; no prepayment penalties
- Cosigner acceptance: No
- BBB rating: A
Pros:
- No minimum credit score requirement
- Fast loan funding
- No prepayment penalties
Cons:
- Not available in NV, WV
- Charges an origination fee
- Approval can take 3 days
9. LightStream
LightStream is an online platform that offers loans to individuals with good-to-excellent credit profiles. Unlike some lenders, LightStream offers benefits like an autopay discount. When you sign up for automatic payments prior to loan funding, you can qualify for a 0.50 percentage point discount on your interest rates.
In addition, LightStream has a convenient mobile app that makes it easy to check your loan balance and make payments. However, the lender has a high minimum loan amount, so if you only need a small loan, you’ll need to look elsewhere.
- Interest rates: 7.49% to 24.49% (with autopay); fixed
- Loan amounts: $5,000 to $100,000
- Loan terms: 2 to 12 years
- Minimum credit score: Does not disclose
- Loan types: Home improvement, debt consolidation, medical expenses, weddings, auto loans, and more; unsecured
- Funding time: As soon as the same day
- Eligibility: Must have good credit; must have sufficient income to support your existing debts and loan amount; must have a valid Visa or Mastercard
- Fees: None
- Cosigner acceptance: No; co-borrowers accepted
- BBB rating: A+
Pros:
- Fast funding
- High maximum loan amount
- Long repayment terms
- No fees
Cons:
- Only approves borrowers with good-to-excellent credit
- High minimum loan amount
- Doesn’t disclose many eligibility requirements
- Must have a Visa or Mastercard
10. Marcus by Goldman Sachs
Marcus by Goldman Sachs offers personal loans of up to $40,000 with budget-friendly repayment options. With Marcus, you can enjoy competitive rates and no fees.
11. OneMain Financial
With over 100 years of industry experience, OneMain Financial is an established source for personal loans. Its loan process typically only takes one day, though this varies based on when you submit your application and other factors.
If you’re looking for a more personal touch, OneMain also offers the option to speak to one of its loan specialists over the phone or at a local branch. It also offers a low minimum loan amount, which is ideal if you’re looking for a small loan. On the downside, its interest rates aren’t competitive for borrowers with good credit.
- Interest rates: 18% to 35.99%; fixed
- Loan amounts: $1,500 to $20,000
- Loan terms: 2 to 5 years
- Minimum credit score: None
- Loan types: Debt consolidation, weddings, medical expenses, emergencies, moving, vacations, home improvement, and more; unsecured and secured
- Funding time: As soon as the next business day
- Eligibility: Must have a Social Security card, valid government-issued ID, proof of income, and proof of residency
- Fees: Origination fee of $25 to $500, or 1% to 10% of your loan amount (depending on your state); late payment fee of $5 to $30, or 1.5% to 15% of your monthly payment or the delinquent portion of your monthly payment; non-sufficient funds fee of $10 to $50 (in select states)
- Cosigner acceptance: No; co-borrowers accepted
- BBB rating: A+
Pros:
- Fast funding
- No minimum credit score
- Flexible loan terms
- Offers secured loans
Cons:
- Charges expensive fees
- Limited borrowing amounts
- Doesn’t disclose many eligibility requirements
12. PenFed Federal Credit Union
Because PenFed is a nonprofit credit union, it’s able to offer lower interest rates than some lenders.
You don’t need to be a member to apply for a loan at PenFed. However, once you decide to go ahead with a loan, you’ll need to become a member. This is a simple process that only takes a few minutes.
PenFed can be a great option if you need a small loan, since its minimum loan amount is just $600. However, the lender doesn’t disclose many of its eligibility requirements online, which can make it difficult to determine if you’ll qualify for a loan before applying.
- Interest rates: 7.74% to 17.99%; fixed
- Loan amounts: $600 minimum to $50,000
- Loan terms: 1 to 5 years
- Minimum credit score: Does not disclose
- Loan types: Debt consolidation, home improvement, transportation, medical and dental expenses, weddings, and more; unsecured
- Funding time: 1 to 7 business days
- Eligibility: Must provide proof of income; must have a Social Security card, utility bill, passport, or copy of a valid government-issued ID for proof of identity
- Fees: Late fee of $29; no origination fees or prepayment penalties
- Cosigner acceptance: No; co-borrowers accepted
- BBB rating: A+
Pros:
- Competitive interest rates
- Small minimum loan amount
- No origination fees or prepayment penalties
- Accepts co-borrowers
Cons:
- Must be a member to receive loan funds
- Doesn’t disclose many eligibility requirements
- Charges late fees
13. Prosper
Prosper is a peer-to-peer lending platform that matches investors to borrowers. If you need money fast, Prosper can usually fund your loan within one business day after verification and final approval of your loan.
While you need a credit score of at least 600 to qualify, you can apply with a co-applicant to increase your chances of approval. On the downside, the lender charges an origination fee, and you may run into other fees for making late payments, paying with a check, and more.
- Interest rates: 6.99% to 35.99%; fixed
- Loan amounts: $2,000 to $50,000
- Loan terms: 2 to 5 years
- Minimum credit score: 600
- Loan types: Debt consolidation, credit card refinancing, emergency, home improvement, pool, dental, special occasions, medical, vacation, vehicle purchase; unsecured
- Funding time: As soon as 1 business day after final approval
- Eligibility: Must be at least 18 years of age; must be a U.S. resident in a state where Prosper marketplace loans are available; must have a U.S. bank account; must have a Social Security number; must not live in IA or WV
- Fees: Origination fee from 1% to 5%; late fee of $15 or 5% of unpaid installment amount, whichever is greater; failed payment fee of $15; check payment fee of $5 or 5% of your payment, whichever is less; insufficient funds fee of $15; no prepayment penalties
- Cosigner acceptance: No; co-borrowers accepted
- BBB rating: A+
Pros:
- Fast funding
- No prepayment penalties
- Wide range of loan amounts
- Accepts co-borrowers
Cons:
- Charges origination fee
- Not available in all states
- Doesn’t offer discounts
14. Reach Financial
Reach offers personal loans for debt consolidation and credit card refinancing, and has helped borrowers pay off $1 billion in debt to date. The lender offers appealing perks, including the ability to customize your monthly payment amount, and free access to your monthly credit score. In addition, Reach doesn’t have a minimum credit score requirement, meaning you may qualify even with bad credit.
Reach offers flexible repayment terms up to five years. The lender also allows you to use autopay, which can help you avoid late fees. However, Reach does charge an origination fee — and since it can be up to 8% of the loan amount, it can be steep.
- Interest rates: 5.99% to 35.99%; fixed
- Loan amounts: $3,500 to $40,000
- Loan terms: 2 to 5 years
- Minimum credit score: None
- Loan types: Debt consolidation, credit card refinancing
- Funding time: As soon as 24 hours after approval
- Eligibility: Must be 18 years of age or older; must be a U.S. resident; must have a minimum annual income of $20,000
- Fees: Origination fee of 0% to 8%; $15 late fee
- Cosigner acceptance: No
- BBB rating: A+
Pros:
- Ability to customize monthly payment
- Fast funding
- Wide range of loan amounts
Cons:
- Only offers debt consolidation loans
- Doesn’t accept cosigners
- Charges origination and late fees
15. SoFi
SoFi offers personal loans up to $100,000, making it a worthwhile option for borrowers who need large loan amounts for home improvement projects, wedding costs, or other needs. SoFi can also fund your loan the same day you’re approved.
SoFi’s website states that you can check your rate online in just 60 seconds, with no impact on your credit score. And you don’t have to worry about how you’ll repay your loan if you’re laid off; if you’re approved for SoFi’s Unemployment Protection, the lender will modify your payments for up to 12 months and will help you find a new job, too.
- Interest rates: 8.99% to 25.81%; fixed
- Loan amounts: $5,000 to $100,000
- Loan terms: 2 to 7 years
- Minimum credit score: Does not disclose
- Loan types: Credit card consolidation, home improvement, wedding, relocation, vacation, medical expenses; unsecured
- Funding time: As soon as the same day you sign your loan agreement
- Eligibility: Must be at least 18 years old (or age of majority in your state); must be a U.S. citizen, eligible permanent resident, or non-permanent resident alien; must reside in a state where SoFi is authorized to lend; must be employed, have sufficient income from other sources, or have an offer of employment to start within the next 90 days
- Fees: None
- Cosigner acceptance: No; co-borrowers accepted
- BBB rating: A+ (not BBB-accredited)
Pros:
- Large loan amounts
- Fast funding
- No fees
Cons:
- High minimum loan amount
- Doesn’t disclose minimum credit score
- Doesn’t accept cosigners
16. Universal Credit
Universal Credit offers fixed-rate loans between $1,000 and $50,000. The company enjoys high ratings on Trustpilot (4.8 stars) and Better Business Bureau (4.81 stars) as of May 2023.
Universal Credit also offers fast funding — personal loans can be funded in as little as one day after you clear the company’s verifications. However, Universal Credit does charge an expensive origination fee, and it has just two repayment term options.
- Interest rates: 11.69% to 35.99%; fixed
- Loan amounts: $1,000 to $50,000
- Loan terms: 3 to 5 years
- Minimum credit score: Does not disclose
- Loan types: Credit card consolidation, debt consolidation, home improvement, large purchases; unsecured
- Funding time: As soon as 1 day after clearing verifications
- Eligibility: Must be a U.S. citizen, permanent resident, or living in the U.S. on a valid visa; must be at least 18 years old (19 years old in Alabama); must have a verifiable bank account; must have a valid email address
- Fees: Origination fee of 5.25% to 9.99%; late fees; no prepayment penalty
- Cosigner acceptance: No
- BBB rating: A+
Pros:
- Wide range of loan amounts
- Fast funding
- No prepayment penalty
Cons:
- Hefty origination fee
- Limited loan term options
- Doesn’t disclose minimum credit score or late fee
- Doesn’t accept cosigners
17. Upgrade
Upgrade should be on your radar if you’re looking for fast funding. You might be able to get your money within a day.
18. Upstart
At Upstart, borrowers with poor credit or no credit at all can still qualify for a personal loan to meet their needs. Upstart’s lending model uses factors beyond your credit score — like your education and employment history — when determining loan approval.
With loan amounts as low as $1,000 and as high as $50,000, Upstart’s personal loans can help you consolidate your debt, cover unexpected medical bills, or finance home upgrades and repairs.
According to Upstart’s website, it only takes five minutes to check your rate. However, you won’t be able to apply with a cosigner, and your loan may come with an origination fee of up to 12% of the loan amount.
- Interest rates: 4.6% to 35.99%; fixed
- Loan amounts: $1,000 to $50,000
- Loan terms: 3 years or 5 years
- Minimum credit score: 300 (or no credit score at all)
- Loan types: Debt consolidation, medical expenses, home improvement, moving costs, education expenses, vacations, weddings; unsecured
- Funding time: As soon as 1 business day after acceptance
- Eligibility: Must be at least 18 years old; must be a U.S. citizen currently living in the U.S. (except active-duty military personnel); must have a valid email address; must have a verifiable name, date of birth, and Social Security number; must have a full-time job, a full-time job offer starting in 6 months (except if accepted to a partner bootcamp and seeking employment after graduation), a regular part-time job, or another source of regular income; must have a valid bank account at a U.S. financial institution with a routing transit number; must meet minimum credit requirements
- Fees: Origination fee of 0% to 12%; late fee of 5% of the unpaid amount or $15, whichever is greater; ACH return or check refund fee of $15; paper copies fee of $10; no prepayment fee
- Cosigner acceptance: No
- BBB rating: A+
Pros:
- Available to borrowers with bad credit or no credit
- Wide range of loan amounts
- Fast funding
Cons:
- Limited repayment term options
- Charges origination and other fees
- Doesn’t accept cosigners
Methodology
To find the “best companies,” Credible looked at loan and lender data points from 10 categories to give you a well-rounded perspective on each of our partner lenders. Here’s what we considered:
- Interest rates
- Repayment terms
- Repayment options
- Maximum loan amount
- Loan funding time
- Fees
- Discounts
- Customer service availability
- Whether the minimum credit score is available publicly
- Whether consumers could request rates with a soft credit check
How to choose the best lender
As you shop around for personal loans, these factors can help you pick the best lender for your particular situation.
Approval requirements
Approval requirements vary greatly from lender to lender. Some lenders look for good to excellent credit. Others are more lenient and open to offering loans for borrowers with fair credit or poor credit. Look for lenders whose eligibility criteria you met.
Interest rates
The interest rate you pay will determine how much your total loan will cost you in the end. If you have strong credit, you’ll find it easier to land a lower interest rate than someone with below average credit. A lower rate can save you hundreds or even thousands of dollars.
Loan amounts
Typically, personal loans range from $1,000 to $50,000. But some lenders on the Credible marketplace offer personal loans of up to $100,000 to qualified borrowers. You’ll need excellent credit to get approved for large amounts.
Repayment options
Repayment terms for personal loans usually range from one to seven years. A longer term means smaller monthly payments, but you’ll pay more interest over the life of the loan. You can lower your interest costs with a shorter term, even though your payments will be larger.
Unique features
Some personal loan lenders offer unique perks to their borrowers. This includes interest rate discounts if you sign up for autopay, free credit score monitoring, and the chance to skip a payment after you’ve made a certain amount of on-time payments consecutively.
Customer service
Since most personal loans come with longer terms of at least a few years, customer service is key. Ideally, you’d choose a lender with high customer service ratings. You should be able to contact them via phone, email, and/or online chat whenever you have a question or concern.
Average personal loan interest rates by credit rating
| Credit score range | Average interest rate |
|---|---|
| Excellent-credit loans | 10.3% to 12.5% |
| Good-credit loans | 13.5% to 15.5% |
| Fair-credit loans | 17.8% to 19.9% |
| Bad-credit loans | 28.5% to 32.0% |
Pros and cons of personal loans
Just like any other financial product, personal loans come with benefits and drawbacks you should keep in mind.
Pros of personal loans
- Can help you build credit: If you make your monthly payments on time, every time, you can increase your credit score. This holds true as long as your lender reports your payment history to the three major credit bureaus.
- Versatile: Personal loans can be used for virtually any purpose. You can take one out to consolidate debt, pay for a home improvement project, or cover unexpected expenses.
- Fast access to cash: Many online lenders offer fast funding. Depending on when you apply and get approved, you can receive your money via direct deposit the same day or the next day.
Cons of personal loans
- Potentially high interest charges: Unless you have good or excellent credit, you might have to pay a high interest rate. This can make your loan more expensive.
- Fees: Some lenders charge fees, like origination fees and prepayment penalties. These fees may increase your overall cost of borrowing.
- Can hurt your credit: If you miss a payment, your credit score might take a hit. The credit damage will be even more serious if you default on your loan altogether.
Types of personal loans and their uses
Personal loans can be used for virtually any expense. Here’s a look at some of the most common types of personal loans.
Debt consolidation
Debt consolidation loans let you consolidate high-interest debt, like credit card debt into a single loan. Instead of multiple debts with various due dates, you’ll have a single loan with one due date to keep track of. Plus, you might be able to save on interest if you can lock in a lower rate than the rates you have on your current debts.
Emergency expenses
An emergency expense can pop up when you least expect it. Your car might break down. Or you may face a sudden illness and require an expensive procedure. In these situations, a personal loan can be a real lifesaver, especially if you don’t want to drain your savings or max out your credit cards.
Home renovations
Many home improvement projects may increase your home value and improve your quality of life. But they don’t come cheap. You can use a home improvement loan to cover the cost of a kitchen remodel, deck addition, or any other home improvement you have in mind. Best of all, you won’t have to risk losing your home, like you would with a home equity loan or home equity line of credit (HELOC).
Major purchases or events
If you don’t have the cash to fund a major purchase, like furniture or an event, such as a wedding, a personal loan is ideal. You’ll receive the funds you need to cover your expenses with ease.
Personal loan FAQs
Below you’ll find answers to some of the most frequently asked questions about personal loans.
What is APR?
The annual percentage rate or APR on a personal loan refers to its total yearly cost and is usually expressed as a percentage. It includes fees in addition to interest. As you shop for personal loans, it’s important to compare APRs so you can choose an option that is right for your budget.
What’s the difference between a secured loan and an unsecured loan?
A secured personal loan is tied to collateral, or an asset you own. This may be your house, car, or savings account. If you default on a secured loan, the lender will be able to seize your collateral.
An unsecured loan, on the other hand, doesn’t involve collateral and is therefore more difficult to qualify for.
What documents are required for personal loans?
Most personal loan lenders will ask you to submit some documents to prove your identity and income. In addition to a completed loan application, you may need:
- A government-issued ID, like a driver’s license or passport
- Pay stubs
- Tax forms
- Proof of address in the form of a utility bill, mortgage statement, or voter registration card
How much will a personal loan cost?
There are a number of factors that determine how much you’ll pay for a personal loan. These include the lender you choose as well as your interest rate and repayment term. You may want to use a personal loan calculator to get an idea of personal loan costs.
Where can I get a personal loan?
Personal loans are offered by banks, credit unions, and online lenders. Online lenders tend to offer low rates and fast funding. Banks and credit unions might be a good option if you’re already a customer and are able to score a discount or competitive rate.
What can you use a personal loan for?
You can use a personal loan to cover just about any expenses. Personal loans are often put toward debt consolidation, unexpected medical bills, major life events, and home improvement projects. A personal loan may even help you start a business.
How much can you borrow with a personal loan?
In general, personal loans range from $1,000 to $50,000. But you may find lenders who offer loans of up to $100,000. The amount you’ll qualify for will depend on factors like your credit, income, and existing debt. Keep in mind that larger loan amounts typically come with more stringent requirements.
How do you calculate your debt-to-income ratio?
Your debt-to-income (DTI) ratio is the amount you owe in monthly debt payments compared to your income. Many lenders use it to decide whether to approve you for a loan.
To calculate your DTI, add up your total debt payments and calculate your monthly gross income, which is your monthly pay before taxes and other deductions. Divide your total monthly debt payments by this number, then multiply by 100. A DTI of no more than 36% is ideal.