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A personal loan can be used for a variety of expenses or to consolidate debt. But before you apply, learn more about every phase of the process — from choosing the best lender to applying quickly to getting an edge on low rates.
Our top pick: Credible Personal Loans
Min. Credit Score Required: Good to excellent credit
Min. Loan Amount: $1,000
Max. Loan Amount: $100,000
5.34% to 35.99%
Requirements: Have good to excellent credit, ages 18+ and be a US citizen or permanent resident.
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Personalized rates in minutes
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Our top pick: Credible Personal Loans
Get personalized rates in minutes and then choose a loan offer from several top online lenders.
Min. Credit Score Required: Good to excellent credit
Min. Loan Amount: $1,000
Max. Loan Amount: $100,000
5.34% to 35.99%
Requirements: Have good to excellent credit, ages 18+ and be a US citizen or permanent resident.
A personal loan is money you borrow from a bank, online lender or credit union. You pay back the amount you borrow with interest in monthly installments. Your lender determines your loan amount, interest rate, loan term and fees based on factors like your credit score, financial history, income and debts. Borrowers with excellent credit tend to get lower rates and better terms, while those with average or bad credit may have to pay a higher interest rate — sometimes as high as 36%.
What types of personal loans are there?
Unsecured loans are the most common option. You receive a lump sum of money that you repay over a fixed period, but you aren’t required to provide collateral to qualify. Because of this, lenders tend to see these loans as more risky — which can increase the amount you pay in interest.
Secured loans work just like unsecured loans, but instead, you’ll need to provide collateral to borrow. This can include your home, car, a savings account or valuable jewelry. Because lenders typically see a secured loan option as less of a risk, secured loans often come with lower interest rates than unsecured loans.
A term loan that comes with a set interest rate that never changes throughout the life of the loan. These can be either secured or unsecured, but they provide you with predictable monthly payments. However, they can sometimes be more expensive than a variable-rate loan, especially if you borrow for a longer term.
A term loan that comes with an interest rate that is subject to change while you’re repaying your loan. Monthly payments can be more difficult to predict, but it could potentially drop if interest rates decrease.
Get access to a revolving amount of funds — similar to a credit card but with a higher limit and lower rates. Lines of credit are good for funding continuous projects that might come with unexpected expenses. These can also be secured or unsecured and have either a fixed or variable rate.
What can I use a personal loan for?
You can use a personal loan to cover a variety of purposes or even consolidate debt. In general, a personal loan can be used in place of your savings. So whatever you can pay for with cash — like a car, vacation or wedding — you can pay for with a personal loan. However, there are a few exceptions: Some lenders won’t let you use your loan funds to pay for college expenses or fund your business.
Just some of the top providers we compare
Personal loan rates by credit score
Personal loan APRs can range from 5% to 36% and vary widely by lender. And while having excellent credit can lower your rate, it can be quite difficult to qualify for the lowest possible number advertised.
Here’s what rate you might expect based on your credit score:
You might get an APR around…
800 or higher
740 to 799
670 to 739
580 to 669
579 and under
Not likely to get approved
So who gets the lowest rate? People with long and impeccable credit histories, high salaries and almost no debt. Some lenders also don’t allow borrowers to qualify for the lowest rates unless they apply to borrow over a certain limit.
Rates can also vary based on factors like income, your debt-to-income ratio (DTI) and even your state. And even the best unsecured personal loan might have a higher rate than a loan backed by collateral.
If you make all of your payments on time and according to schedule, taking out a personal loan can help you build your credit. In fact, some lenders offer small-dollar, short-term loans with low interest rates that are designed to help borrowers build credit.
However, borrowing a personal loan can damage your credit if you fall behind on your repayments. Your ability to make your payments on time is the most heavily weighted factor credit bureaus consider when calculating your score.
5 tips for getting the best rate on a loan
Watch the 2-minute video above or read the tips below.
If you have a long history with a bank or credit union, you might want to consider borrowing from that financial institution to take advantage of member perks. However, online lenders offer a wide variety of loan types that may fit your needs better than what your bank offers.
You’ll generally need a score in the “good” range— 680 and above — to secure a decent rate. Your credit score and credit report are two different things. The latter is a detailed record of your credit history. Learn how to get a copy of your credit report and be sure to check for errors. Correcting incorrect listings, such as unpaid accounts that were actually paid, can help improve your credit score and help you obtain a better APR on a loan.
Loan applications may appear as inquiries on your credit report. Be sure to review the eligibility criteria to see if you may qualify. When comparing your options, you can also ask if the lender offers preapprovals before submitting your actual loan application. Asking questions before you fill out an application can help narrow down your options.
Having a lower DTI is sometimes just as important as having good credit: It can improve the rates and repayment terms you’re ultimately offered. Aim to keep your DTI under 20%.
The amount you apply for has a direct influence on the rate you’re offered, so only ask for as much as you need.
Can I meet the employment requirements? Personal loans can be difficult to qualify for if you’reself-employed or unemployed — you’ll need to prove you’re able to pay it off to be approved.
Do I have the credit score? You could have a hard time getting approved if you have a history of making late payments or have never taken on debt before.
Can’t I just use my credit card?
You could, but personal loans typically have lower interest rates than credit cards. In fact, people often take out personal loans to help them pay off their credit card debt at a more competitive rate.
But if you need cash right away or only want to make a small purchase, a using credit card can be a better choice. Personal loans can sometimes take weeks to fully process and deposit into your bank account. You can also use credit cards for a wider variety of expenses than a personal loan, including education costs. Find out when a personal loan or a credit card makes more sense
I want a personal loan — where should I look?
You have a variety of lenders to pick from. However, you’ll typically more loan options if you have stronger credit. You can apply for a personal loan in person, online or over the phone with one of the following types of lenders.
Direct online lenders
Online lenders often have more flexible lending criteria and offer a straightforward application process. Some are even willing to work with potential borrowers who have a credit score as low as 530. If approved, your loan amount can be deposited into your bank account as soon as the next business day — although it may take up to a week.
Brokers and connection services
Brokers can pair you with a lender after you fill out a preliminary application. The lender must still make a decision on your application before you receive your funds.
Connection services are slightly more automated than brokers but work the same way. They can help you find more flexible terms or flexible payment options if you don’t have excellent credit. But you might not be able get approved the same day you apply.
Getting a personal loan from a bank might be the traditional choice, but it’s not always the best option. If your bank offers them, it might not be a bad idea to look into your borrowing options — they sometimes offer discounts to people that already have an existing account. However, banks typically have stricter approval criteria, a longer turnover time and are sometimes more expensive than other options.
If familiarity is important to you, you can consider borrowing a loan through a credit union or bank you already have a strong financial history with. Like banks, credit unions are more traditional lenders, though they don’t have fast approval and often have stricter eligibility requirements than other loan companies.
Relatively new to the financial market, peer-to-peer lenders operate as marketplaces that bring investors and borrowers together. They facilitate the loan process between individuals rather than offering loans themselves. The process of obtaining a peer-to-peer loan is a lot like getting a loan through a direct online lender. However, the turnaround time is often much longer.
Interest rate. This is what the lender charges you to borrow money and is usually a percentage of the loan amount.
Fees. It’s common to see origination fees up to 5% of the loan amount. Other common personal loan fees include prepayment penalties if you plan to pay your loan off early. Lenders may also charge for late or missed payments and unsuccessful or failed payments.
Loan term. Your loan term is how long you have to pay off a loan. The longer your loan term, the more you pay in interest. But while you’ll pay less with a shorter term, your monthly payments could be much higher.
Your annual percentage rate (APR) is an expression of your interest rate and fees as a percentage. APR can give you an idea of how much it will cost each year you take to pay back your loan. It doesn’t include late fees, nonsufficient funds fees (NSF) or prepayment penalties.
What makes a personal loan competitive?
There are a few key features you’ll want to consider when comparing loans. To find the best deal, ask yourself these questions:
Can I borrow the amount I need? Will you be able to take out the exact amount you need and can you afford to pay it back? Typically, good and excellent credit scores have higher borrowing limits.
Does it have a competitive interest rate? Look at the rate itself but also consider whether it’s fixed or variable — variable interest rates are subject to change.
What are the fees? Most lenders charge application, origination, prepayment, late or NSF fees.
How long will I have to pay it back? Aim for a loan term that gives you monthly repayments you can afford without being too long. Otherwise, you could wind up paying a lot in interest in the long run.
Can I use it to pay for what I need? You can use a personal loan for almost any purpose, but some lenders have spending restrictions. For example, many don’t allow you to use the funds to pay for education costs or investments.
Will I need collateral? Secured personal loans require you to put up something you own as collateral — a car, a home or even a bank account. Unsecured personal loans do not.
What lenders look for in a personal loan applicant
Lenders take on risk when they lend large amounts of money to borrowers. That’s why they require applicants to meet certain eligibility criteria. Here are some common qualifications that the best loan companies look for:
Low DTI. You can calculate your DTI by dividing your monthly debt payments by your monthly income. Lenders can rely on this number as much as your credit score and normally don’t accept anyone with a DTI above 43%. A good DTI is anything below 36%, though under 20% is ideal.
Employment. Most lenders require you to be steadily employed. Some lenders have minimum income requirements as well that can include wages, alimony, pensions or any other form of funds coming in on a regular basis.
US citizen or permanent resident. If you’re a US citizen or permanent resident, you’re able to apply for personal loans. Temporary residents are only eligible to apply with certain lenders but may need to build up a credit history. They may also need a US citizen to cosign the loan. You may be able to get one as a non-US resident if you have full-time employment and a US Social Security number.
18 or older. Since the age of majority varies by state, the minimum age for lenders varies as well and is usually between 18 and 21.
Personal loan application checklist
The application process differs between lenders, but they’ll generally ask for the following:
Proof of your identity, like a government-issued ID, US passport or military ID
Your Social Security number and date of birth
Pay stubs, tax returns and other income details
Banking details for disbursing your funds and elective automatic repayments
Utility bill in your name or other proof of residence
How to apply for a personal loan step by step
The first thing you need to do once you decide to apply for a loan is determine exactly how much money you want to borrow. Borrowing too little or too much could leave you either unable to cover your costs or with extra money that increases how much you pay in interest.
The first lender you come across may not have the best deal. Shop around and make sure to compare factors like APR, fees, turnaround time and term of the loan. You can check out our table of loan providers to compare these features. Be sure to read the requirements as well to make sure you qualify before submitting an application.
Once you’ve narrowed it down to a few different lenders, you might want to apply to prequalify. Prequalifying can give you an estimated offer based on a soft credit pull that gives your lender your estimated credit score. That way, you can compare your potential loan offers.
Keep in mind that your estimated APR might not be the same as the APR you end up with after your submit a full application and undergo a hard credit check. Different lenders have different ways of assessing your creditworthiness.
Check that you’re applying on a secure website before you submit any personal information like your Social Security number.
Applying for a personal loan is typically a quick and straightforward process that goes something like this:
Personal details. Gather the necessary information such as proof of identity (passport, driver’s license, or ID), proof of address (utility bills or lease), and proof of income (W-2s, pay stubs or bank statements).
Loan application. This is where you request a certain loan amount, specify what you want the loan for and choose your terms. Many banks and lenders have applications online, so you avoid the hassle of having to go to a branch and fill out paperwork.
Loan agreement. If you’re approved, sign the loan documentation and agree to all the terms. With most lenders you’ll have a certain amount of time to rescind the agreement, should you change your mind.
Many lenders require that you have a checking account to receive your money via direct deposit, but that’s not always the only option. Some lenders may be able to send you a check in the mail.
If you take out a loan for something specific, such as a new car purchase or debt consolidation, the lender may send the funds directly to the company you owe. If you take out a general personal loan, the funds will go to you to use for the purpose specified in your application.
It’s important to make your payments on time so you don’t end up paying extra in fees. Be sure to verify how you will be required to make payments. Can you pay by phone with a credit card or account number? Is there an automatic payment option?
So you’ve been approved and the money is in your bank account. You’re done, right? Not quite. Now you have to pay it back according to the payment plan in your contract.
Many lenders — especially online lenders — require you to set up autopay with your bank account. Others might give a discount on interest if you set it up.
Autopay is a great way for you to make sure you don’t miss any payments — but don’t think you can just forget about your loan. If your account doesn’t have enough money to cover your repayment, you could be slapped with an NSF fee.
In fact, it’s a good idea to stay in touch with your lender, especially if you run into any trouble making repayments. Many lenders are willing to renegotiate your loan if you have an unexpected financial problem. You won’t know until you ask. The fastest way to get in touch is usually by phone. Some lenders also have a live chat option, but those are generally better for finding basic information.
Most personal loans have interest that accumulates during your loan term, but some require you to pay most of your interest in the first few months. With the first type of loan, check if your lender charges prepayment penalties for breaking from your payment plan. If not, you can save on interest by paying off your loan early.
If you’re considering prepaying your entire loan, look for your payoff amount — not your balance. Your payoff amount includes interest and fees and you can typically find it on your online account. Don’t have an online account? Call your lender.
Interest that’s accumulated on a loan since it was issued but has not been paid yet.
Also, variable rate. An interest rate that’s subject to change.
A loan that has regular, scheduled repayments that go toward paying both the loan’s interest and principal.
An expression of a loan’s interest rates and fees as a percentage.
An increase in an asset’s value (such as a car or home).
Anything that someone owns that has money value, including cash, a home, owed debt, a trademark or patent.
An electronic payment made through the ACH network from one bank account to another. ACH is used for direct deposit from your employer or when a lender transfers funds directly into your account.
A service that allows you or a loan provider to automatically withdraw money from your account on a regular (usually monthly) basis.
The person taking out a loan from a bank, credit union or other lender.
A third party that acts as an intermediary between lenders and potential borrowers for a fee.
An easy way to remember what lenders look at when determining your creditworthiness. The five Cs are: Character, capacity, conditions, capital and collateral.
Interest that’s added to your loan’s principal instead of being treated separately.
Also, settlement. The final step in taking out a loan, when the loan agreement is signed and the funds are dispersed.
Someone who also signs your loans and holds responsibility to repay it if you default.
Interest that is periodically added to a loan based on your accumulated interest and principal.
Also, credit bureau. An agency that gathers information from your creditors to compile your credit report and credit score.
How a lender values your likeliness to be able to repay a loan. Your credit score is typically used as the best expression of your creditworthiness, though your income, debts, age, employment status also play a large role.
D to O
Your gross monthly income divided by your gross monthly debt payments.
A failure to repay debts, which can result in the seizure of collateral or lawsuits.
An arrangement in which a borrower doesn’t have to start making payments on a loan until a certain agreed-upon time (common with student loans).
A decrease in an asset’s value (such as a car or a home).
An initial payment you make upfront when purchasing an expensive item. A loan is used to cover the rest of its cost.
The difference between the value of an asset (like a car or home) and the balance of a loan used to pay for that asset.
A third-party account that holds money before two parties go through with a transaction. Common with debt settlement companies.
Your credit score assigned by one of the three credit bureaus: Experian, Equifax and TransUnion. When a lender sets credit score requirements, they’re most likely talking about your FICO score.
The amount of time a borrower has to make a payment before the lender charges a late fee.
A loan where a third party agrees to assume at least part of the debt if the borrower defaults.
The amount a lender charges for letting someone borrow its assets, typically expressed as a percentage. Loan agreement. The contract that a borrower signs agreeing to the lender’s terms and conditions.
The largest and smallest amount of money a lender is willing to let someone borrow.
When the loan payment doesn’t cover the accrued principal for that period, which is added to a loan balance.
P to Z
Paying more than your monthly payment on a loan,
The interest rate that lenders give to their most creditworthy customers, generally based on the Federal Reserve or Wall Street Journal’s prime rate.
Your loan balance, not including interest.
The document you sign before you take out a loan legally binding you to the terms and conditions of repayment: Your loan documents.
The option to buy a leased car or home, typically for a balloon payment.
Taking out another loan with more favorable terms to pay off a debt. Revolving debt. Open-ended access to a certain amount of funds that you pay off as your borrow, (like a credit card).
A loan that is backed by collateral.
Interest that’s calculated based on your loan’s balance, not balance and accumulated interest.
[fin_accordion title=”Having a long history of repaying debts on time with a high credit score — good credit or higher. Typically necessary to get approved for a loan with a competitive rate.
Credit for borrowers with bad or poor credit, typically with higher interest rates.
The amount of time a borrower has to repay a loan.
A document that proves ownership of an asset (like a car or home).
A loan that is not backed by collateral.
When you owe more money on an asset that it’s actually worth.
Frequently asked questions about personal loans
You can typically borrow between $2,000 and $50,000. Some lenders offer loans up to $100,000.
The best personal loan for you depends on how much you need to borrow, how quickly you need the funds and what you can qualify for. You may want to compare things like interest rates, loan amount and how legit the lender is. Read our “best personal loans page” to learn how to find the best personal loan for you.
Some lenders can approve your application by the next business day if you apply by a certain cut-off time. If additional verification is required or if you need to take documents to a branch location, this may delay the process a few days. You can usually find out the turnaround time from the lender before you apply.
The interest rate is what the lender charges for lending you the money. The APR is more representative of the true cost of the loan as it includes all fees that come with the loan as well as the interest rate.
You can, but it might not end well. Investing itself is incredibly risky and taking out a personal loan increases that risk even more. Some experienced investors take out personal loans after they’ve gotten the hang of weighing the risks, but it takes a while to get to their level. And even they don’t always win.
There’s no technical definition for this but prime borrowers are typically thought to have credit scores above 720, have no delinquencies on their credit report and have a minimum six-year credit history.
Yes, in fact several lenders offer loans with no origination fee — or any other fee associated with applying or even paying back the loan. You might want to check out our guide to find a no-origination fee personal loan that works for you.
There is no one way to get the lowest rate on every loan, since each lender has a different way of evaluating your application. For example, lenders like Upstart consider your level of education over your credit score. But generally, you can get a lower rate if you work to improve your credit score and pay off any outstanding debts before you apply.
Interest rates vary by lender, but can be as low as under 3% and as much as 36%. Generally, the higher your credit score, the lower your interest rate on a personal loan.
Your interest rates will depend on lots of factors including your credit, the length of the loan and your other qualifications. You can find the starting APR’s for lenders in our comparison table above.
Personal loans themselves aren’t bad for your credit. As long as you make regular payments and pay within the terms of the loan, a personal loan can actually improve your credit score to prove you can handle your debt responsibly.
Unsecured loans, or otherwise know as signature loans, are loans that don’t require any collateral. They are based on your creditworthiness. Keeping your credit rating at good or excellent will get you a better rate. Usually you need to have proof of income, be a resident of the US and a Social Security number to apply for an unsecured loan.
Most lenders offer loans from one to seven years.
The amount you can get for a personal loan depends on the type of loan and the lender. Typically you can borrow up to $100,000.
When you borrow money, you might end up with more than you actually need. Or a last minute, emergency expense might arise. Are you allowed to do whatever you want with the money as long as you repay it on time? This all depends on the type of loan you apply for. Some loans, such as home and student loans, come with restrictions and are virtually impossible to spend on something other than what they’re meant for. Auto lenders are typically more lenient but considering there will be a lien on your vehicle until the loan is repaid, it makes it more difficult to repurpose the funds. Some people will even take out loans without any plans of using the money the way they were intended to. In a process known as a “spread”, borrowers will invest money with the hopes of earning more than they have to pay in interest.
While there’s technically no law against it, if you default, your lender could still choose to take legal action should they find out that you’ve used the money for something other than what you agreed to. This would be on the grounds that you falsified information on your application.
Not unless it’s a tiny house. Otherwise you’ll need a mortgage. Mortgages work differently than personal loan and are a bit complicated. To learn more about how home loans work, visit our guide to mortgages.
Before you visit Laurel Road..
The most qualified applicants have a minimum credit score of 680. Laurel Road tends to be best for people with annual income above $60,000 and total debt of less than 40% their income. If you don’t think Laurel Road is best for you, explore other loan options.
Aliyyah Camp is a publisher helping folks compare personal, student, car and business loans. Prior to joining Finder, she ran her own personal finance blog and wrote for numerous finance sites. Aliyyah earned a BA in communication from the University of Pennsylvania. She regularly attends industry conferences to stay in the know about market changes that can affect consumers. When she's not helping people with their personal finances, you can find her at the movies or going for a run outdoors.
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