What Is a Personal Loan?
A personal loan is a fixed-amount loan that you repay in scheduled monthly payments over a set term, typically with a fixed interest rate. Most personal loans are unsecured, meaning they don't require collateral.
Personal Loans
Understand and compare personal loan options
A clear, plain-English overview of how personal loans work, what lenders consider, and how to evaluate the offers you may receive.
How Personal Loans Work
After approval, the lender deposits the loan amount in your account. You then make equal monthly payments — covering principal and interest — until the loan is paid off at the end of the term.
Common Personal Loan Uses
Borrowers commonly use personal loans for debt consolidation, refinancing high-interest balances, home improvement, medical expenses, or other major planned purchases. Permitted uses vary by lender.
Personal Loan Requirements
Lenders generally evaluate credit history, income, employment status, debt-to-income ratio, and overall ability to repay. Specific requirements vary by lender and loan program.
How Lenders Evaluate Borrowers
Underwriting may include verifying identity, income, employment, and reviewing consumer report data. Strong credit and stable income generally improve the range of options available.
What Loan Terms Mean
Loan term is the length of time you have to repay the loan, typically 24 to 84 months. Shorter terms usually mean higher monthly payments but less total interest. Longer terms reduce monthly payments but may increase total interest paid.
Fixed-Rate vs. Variable-Rate Loans
Most personal loans carry a fixed interest rate, meaning your monthly payment doesn't change. Variable-rate loans may start lower but adjust based on a benchmark index over time.
Fees to Understand
Some lenders charge an origination fee deducted from your loan proceeds. Others may charge late fees or returned-payment fees. Many do not charge prepayment penalties — check before accepting an offer.
How to Compare Offers
Compare APR, total repayment, monthly payment, fees, and term length. APR provides a more complete picture of borrowing cost than the interest rate alone.
Borrower checklist
- Know how much you actually need to borrow
- Confirm your purpose qualifies with the lender
- Compare APR — not just interest rate
- Check for origination, late, or prepayment fees
- Review total repayment over the full term
Loan approval, rates, and terms are determined by participating lenders and are subject to eligibility, underwriting, and applicable law. Not all applicants will qualify.