What is a personal loan? How it works and what to use it for

What is a personal loan?

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Find out exactly what a personal loan is and how to find the right loan to get to where you want to be.

If you’re looking to make a big purchase, a number of small purchases or even to consolidate existing debt, you might wonder if a personal loan is the right choice for you. What sort of personal loan should you apply for? Secured or unsecured, fixed or variable rate?

There are many options to consider no matter what you’re looking to finance or how much you need to borrow. Our guide below will explain exactly what a personal loan is, what options there are and how you can apply.

Credible Personal Loans

Our top pick: Credible

Quickly get personal loan offers from top online lenders.

  • Minimum Loan Amount: $1,000
  • Maximum Loan Amount: $50,000
  • Loan Terms: 2–5 years
  • One simple form
  • Must have good to excellent credit

    What is a personal loan?

    A personal loan is a type of credit that helps you finance a personal expense. Terms are typically between one and seven years and can be taken out as secured (with collateral) or unsecured (without collateral). Personal loans start from as little as $1,000 and can reach over $100,000. These loans are available from online lenders, brokers, banks, credit unions and peer-to-peer marketplaces.

    Compare personal loans

    Rates last updated September 21st, 2018

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    Unfortunately, none of the personal loan providers offer loans for that credit score. If you are in urgent need of a small loan, you might want to consider a short term loan.
    Name Product Product Description Min. Credit Score Max. Loan Amount APR
    Credible Personal Loans
    Get personalized rates in minutes and then choose a loan offer from several top online lenders.
    Good to excellent credit
    4.99%–36% (fixed)
    Monevo Personal Loans
    Quickly compare multiple online lenders with competitive rates depending on your credit score.
    3.09%–35.99% (fixed)
    Even Financial Personal Loans
    Get connected to competitive loan offers instantly from top online consumer lenders.
    4.99%–35.99% (fixed)
    LendingClub Personal Loan
    A peer-to-peer lender offering fair rates based on your credit score.
    6.16%–35.89% (fixed)
    SoFi Personal Loan Fixed Rate (with Autopay)
    No fees. Multiple member perks such as community events and career coaching.
    6.990% – 14.865% (fixed)
    Payoff Personal Loans
    Pay down your debt with a fixed APR and predictable monthly payments.
    5.99%–24.99% (fixed)
    NetCredit Personal Loan
    Check eligibility in minutes and get a personalized quote without affecting your credit score.
    34%–155% (Varies by state) (fixed)
    Best Egg Personal Loans
    A prime lender with multiple repayment methods.
    640 FICO®
    5.99%–29.99% (fixed)
    FreedomPlus Personal Loans
    Consolidate debt and more with these low-interest loans. Cosigners welcome.
    4.99%–29.99% (fixed)
    OneMain Financial Personal and Auto Loans
    An established online and in-store lender with quick turnaround times. Poor credit is OK.
    16.05%–35.99%* (fixed)

    Compare up to 4 providers

    What can you use a personal loan for?

    Personal loans can help you in a variety of different situations, including:

    How to compare common personal loan features

    • Fixed rate vs. variable rate.
      A fixed rate loan will guarantee you a certain rate for a specific amount of time – you know what your repayments will be no matter what happens in the market. On the other hand, a variable rate loan may experience fluctuations in the interest rate depending on the market, which could result in your repayment amount changing. Dig deeper into the rate comparison here.
    • Secured vs. unsecured.
      A secured loan requires you to put up a valuable asset as collateral. The collateral provides a guarantee to the lender and gives the lender something to recoup in the event that you default on the loan. An unsecured loan doesn’t require collateral. Unsecured loans tend to come with higher interest rates than secured loans because of the increased risk on the lender’s part. Dig deeper into the security comparison here.

    “How can I get a personal loan?”

    Once you’ve found the right personal loan for your needs and financial situation, it’s time to apply. Here’s what you need to know to submit your application and be approved.

    • Check if you’re eligible.

    The eligibility criteria given by lenders is usually the minimum they will accept, so you must meet the minimum age, income and employment requirements. The lender may also require you to have good credit or to finance a particular purchase (a new car as opposed to an older car if you are getting a car loan, for example). If you do not meet one or more of the criteria, you are probably not eligible for the loan.

    • Confirm the loan is right for you.

    Can you apply for the amount of money you need? Will you receive your loan in time? Will you be offered terms, fees and rates that meet your budget?

    • Find out what documents you need.

    The majority of lenders let you submit your documents and complete the entire loan application online. You may need digital copies of your identification, employment and financial documents to send to the lender to verify the information you provide in your application.

    • Submit your application and wait for approval.

    If you submit your application online, you can usually receive a response quickly. Some lenders will tell you within a few minutes if you’ve been approved, while others may take a few days or weeks to process your application.

    Frequently asked questions about personal loans

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    US Personal Loans Offers

    Important Information*
    Even Financial Personal Loans

    Get connected to competitive loan offers instantly from top online consumer lenders.

    Prosper Personal Loans

    Borrow only what you need for debt consolidation, home improvements and more — with APRs based on overall creditworthiness.

    LendingClub Personal Loan

    A peer-to-peer lender offering fair rates based on your credit score.

    SoFi Personal Loan Fixed Rate (with Autopay)

    No fees. Multiple member perks such as community events and career coaching.

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