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Personal Loans

Compare and choose the right personal loan provider for your needs, whether it's debt consolidation, credit card refinancing, or a major purchase. To get started, filter the results, check your rate, and learn more about borrowing in the guide below.

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What Are Personal Loans?

Personal loans may be secured or unsecured. For example, you can secure a personal loan using your car’s title for collateral or opt for a higher interest rate and apply for an unsecured loan for your funding needs. If the loan is secured, the lender uses the collateral to apply toward the loan if you cannot repay the loan amount back. Examples of secured personal loans include title loans or loans where you provide your savings or a personal asset, such as jewelry, for collateral.

However, with that being said, an unsecured loan is the most common example of an online personal loan. You do not have to put up collateral for this type of financing.

However, that does not mean taking out an uncollateralized loan will have no effect. Defaulting on a personal unsecured loan will damage your credit score, which, in turn, will raise the cost of borrowing money. Just keep that in mind when borrowing money online. 

Remember – If you take out a personal loan, the APR you have to pay will be dictated by your credit score. If you have a lower credit score, you will naturally pay a higher APR, as you present a greater risk to the lender. So, when you ask, “What is a personal loan?” it is good to keep the above information in mind. If your credit score is below 640, remember that the interest rate is generally higher. Payback periods for personal loans range, on average, between 5 to 7 years.

Reasons to Take Out a Personal Loan

Borrowers may take out a personal loan for various reasons. Often, the best personal loan option will vary depending on the purpose of the loan. Many reasons for personal loan funding are listed below.

Consolidating Credit Card Debt

You can use a personal loan to consolidate your current credit card debt. The idea here is to pay one payment per month for all your credit cards instead of making individual payments. Many people choose to consolidate their credit card debt in order to reduce the interest they are paying on individual credit cards and keep better track of their finances.

Getting Quick Cash for an Emergency

If you need quick cash for a vehicle breakdown or need to pay for a plumbing repair, what can you do? Some people find that taking out a personal loan at a reasonable amount of interest provides a solution for any unexpected predicament. 

Receiving Money for Business Capital or For Buying Inventory

Some people need to secure a personal loan to obtain business funding or capital for a start-up. A personal loan offers a borrower a quick form of cash for this purpose. Most start-ups like to obtain a personal loan for business capital, as they can pay back the amount over a shorter period of time and can meet their financial and legal obligations.

Pay Off a Student Loan or Pay for Education

You can meet your student loan obligation by using a personal loan to pay off the amount or, at least, reduce it. Some people also use the loan to fund their educational needs now. Regardless of the reason, you can pay for your education without hassle.

Pay a Tax Debt

If you owe taxes to Uncle Sam, you can make the required payment by applying for a personal loan. Doing so will bring you peace of mind and will enable you to comply with the requirements set by the IRS financially and legally.

As the name implies, a personal loan is a type of funding that allows you to use the money for your personal needs, whether they involve business, personal finance, or education.

Obtaining a Wedding Loan

Needless to say, weddings are expensive. Therefore, some people find that taking out a personal loan for a wedding can greatly relieve the financial burden of this type of once-in-lifetime expense. 

Financing a Boat

Some borrowers use a personal loan to pay for a major purchase, such as a boat. If you love boating and/or fishing, contacting a personal loan provider could potentially give you a way to enjoy your pastime more easily.

Paying for a Vacation or Cruise

Would you like to take the dream vacation of a lifetime? If so, contacting an online personal loan vendor can place money in your bank account quickly and conveniently. This type of loan makes it possible for you to enjoy a getaway whenever you choose.

Why do you want to take out a personal loan?

How much can you repay?

People find it important to answer these questions first before applying for funding.

Personal Loans Average Rates

As noted, your credit score for personal loans needs to be high enough to take care of the debt and repayment.

Credit Score Rating Average APR
720 – 840 Excellent 10.3%
680 to 719 Good 13.5%
640 to 679 Fair 17.95%
Under 640 Poor 21.0%

In the table above, you can find the average APR for each credit score based on a list of the lenders we have reviewed. Please keep in mind that this table is intended to provide a general sense of what to expect and does not represent an expected APR offering from any lender. 

As you can see from the chart above, the APR is lower for a person with an excellent credit rating than for someone who has a poor credit score. Therefore, you need to keep this in mind when you apply for any kind of loan, especially a personal loan. As most personal loans online are usually not secured, it is helpful to keep the average APR in mind.

How to be Prepared Before Applying for a Personal Loan

Before you apply for a personal loan, it is recommended to be prepared. The following checklist helped some to make the appropriate adjustments or gather the correct documentation to apply for a personal loan. 

Check Your Credit Score

The decision for funding a personal loan often depends on your credit rating or score. A credit score may range from 300 to 850. Therefore, the APR for the loan will depend, to a great extent, on the score and your financial history.

Again, if the credit score is lower, the interest rate will be higher than what it will be for a credit rating that is higher. You can usually receive the funds in 1 to 2 days by direct deposit in your bank account

Check Your Payment History

Most lenders will determine personal loan approval on 35% of your FICO score or credit rating, based on payment history. Naturally, a lender wants to play it safe, so he or she has to look for any red flags when it comes to your payment history.

For example, if you have several missed payments or late payments, you may need to make some adjustments. Make a commitment to paying all your bills on time to improve your standing in this area. It also helps to sign up for automatic withdrawals so you don’t forget to pay your monthly obligations.

However, with that being said, it does not mean you won’t get the loan for a few missed payments. If you have a good reason for missing the payments, the lender will also consider this factor. In addition, some lenders will still approve the loan, as they will just charge an interest rate that is a bit higher.

Check Your Credit Utilization Ratio

If you want to apply for a personal loan, you need to check your credit utilization ratio as well. This percentage represents the amount of outstanding credit card debt you have in relation to your credit limits.

The credit utilization ratio accounts for 30% of your credit rating or FICO score. Basically, a lender looks at how much credit you currently have and how much credit you have available. The lower the ratio, the better. When you compare personal loan companies, keep this factor in mind.

Know your Credit History

Besides checking your payment history and utilization of credit, you also need to review other factors that contribute to your credit score. These factors include the length of your credit history (how long you have been using credit) and the number of new credit applications you have recently completed. Longer credit history and applying for fewer credit offers will increase your score.

Access to a Co-Signer

A co-signer is a person who is added to the primary borrower’s loan application stating that they will be accountable for the loan amount and other associated fees if the borrower does not comply with the payments. Most borrowers require a co-signer especially if they can’t qualify for the loan by themselves.

This is because co-signers have a higher credit score and incorporating them in a loan application can boost the chances of getting the loan funds. In addition, the borrower may be subjected to lower interest rates and favorable terms. A co-signer does not have any right to the loan funds but will be accountable in case the borrower does not adhere to payments. 

Have a Plan to Payback your Loan

Financial planning refers to how you intend to invest, spend, and use your funds to attain financial stability as well as fulfilling your short-term and long-term objectives. In a balanced financial plan, the revenues are equal to expenditures. This means that there are no budget deficits or budget surpluses.

For some people, it helps in forecasting expected income and expenses for the future. Thus, you might  be in a better position to make wise financial decisions. It could also help you avoid taking a loan that cannot be paid back and lifestyle changes that will suit a balanced financial plan. 

Consider a Secured Loan

When shopping for a loan, you may be confused about whether to take a secured or unsecured loan. However, a secured loan poses superior merits to unsecured ones. Some lenders also consider giving borrowers longer repayment terms which give you ample time to make the payments.

Getting a secured loan is usually easier due to the availability of collateral. Furthermore, secured loans usually come at lower interest rates. This is because the lender has less financial risk due to the presence of collateral. 

Check Your Financial Data

In addition, you need to look at how you will appear to a lender in terms of work history, current earnings, and what you currently have in total debt. The lender merely wants to know if you can repay the loan once you receive the money. Therefore, if you make more money, have more assets, and have acquired minimal debt, you will look better in a lender’s eyes.

Check Your Current Credit Score and See What Activities Have Affected Its Rating

The main thing you have to keep in mind when applying for a personal loan, is your credit score rating. This rating is important, as it determines how much interest you will have to pay on the loan amount. When you compare personal loan companies and review their services, they will give you the interest rates for specific credit ratings.

Check to Make Sure You Have the Appropriate Information and Documents

When applying for a personal loan, you should produce documentation that includes a government-issued I.D. (for proof of age and residence); tax information for earnings; payment stubs; and any other data that will help you secure a loan.

For example, some personal loan lenders require that you show proof of auto insurance and a vehicle title when applying for a personal loan. Based on the lender’s requirements, have this type of information ready when applying for a personal loan.

If you prepare yourself properly, you will know what to expect and feel more confident when facilitating personal loan funding online. Using this source of funding can bode well for you as long as you can use the money for something that will improve your lifestyle.

For all of these helpful tips and more, it is often recommended to follow a personal loans guide to keep information clear, structured, and relevant.

Does a Personal Loan Affect Your Credit Score?

Your credit score for personal loans will again impact your APR, or the interest you will need to pay. Look for the lowest APRs for your specific credit rating. For example, a poor credit score will come with a higher interest rate, so always go with the rate that is the lowest.

Ask these questions when taking out a personal loan –

Will I benefit from taking out the loan?

For example, a loan taken out to consolidate debt with a lower interest rate can help you pay down your obligations.

Can I repay the debt?

Seriously consider your ability to repay. Missing a payment or 2 can drive down your credit score, so you want to make sure you can manage repayment.

How to Start Your Personal Loan Search

So, what is the best way to begin your personal loans comparison?

To find the best personal loans, you can start by looking at the loan vendors and following the personal loan reviews left by previous borrowers. Pay attention to what they offer in terms of interest rates and check out the amount of loan funding.

To choose the best personal loan vendor and personal loan for you, some find it useful to compare the interest rates of several lenders. The loan with the lowest APR typically is the best choice.

When making comparisons of personal loan vendors, the average personal loan monthly payment will be featured as well. Think about this carefully. Can you afford this payment and will you be able to pay it back over the term of the loan?

If you choose a personal loan with a longer term, the payments may be lower. However, you will also pay more in interest over the loan’s life. Therefore, look at how the payments can be integrated into your monthly budget. Also, what kind of payment options does a lender provide?

For instance, some lenders, that provide personal loans, will allow you to defer your payments or change the payment due date if needed. By using a lending platform that highlights various lending sources, you can make comparisons of the loan products, pre-qualify for a loan, and review the estimated rates without affecting your credit score.

Some people find that using a lender marketplace or platform to assess lending sources is the best way to find a personal loan that you can work into your budget. It will also allow you to receive the loan proceeds conveniently and easily. In some cases, you can receive your money the next day by direct deposit into your bank account.

By making personal loan comparisons on a lending platform, you can get a better idea of how to proceed with the personal loan process.

Important Personal Loans Terminology

As you search for a personal loan, you will encounter some financial terms that you need to know. Let’s cover a few of the most important terms so you feel comfortable moving forward.

Secured Unsecured Loan
What makes a loan “secured” is when you back it up with some form of collateral, such as a car title or vehicle. This places less risk on the lender. If you default on the loan, they can claim the collateral.

Unsecured Personal Loan
An unsecured personal loan is the most common type of personal loan. It does not require collateral. Because the loan presents a higher risk to the lender, an unsecured loan usually comes with a higher interest rate.

Fixed-Rate of Interest
Most loans today can be secured at a fixed rate of interest. This means that the loan may be secured at one established APR for the life of the loan.

Variable Rate of Interest
A loan with a variable rate of interest may be harder to pay back, as the interest rate can change, and therefore alter the amount of the monthly payment.

Co-Signer for Loan
If you have a poor credit score but want to secure a lower rate of interest for your personal loan, you might ask that a cosigner sign the loan agreement as well. This person should have a good credit rating and be willing to repay the loan if you cannot do so yourself. Having a cosigner makes it easier to get approved for a personal loan and lock in a lower APR.

Marketplace Lender
A marketplace lender represents a company that allows you to review multiple lenders within its service network. Using the services of a marketplace lender allows you to compare lending sources and potentially find the best APR and loan terms for you.Direct Lender
As the name suggests, a direct lender provides personal loans directly to borrowers.

How has Covid-19 Impacted Personal Loans?

It’s no secret that Covid-19 tumbled everything worldwide and personal loans follow suit. During the pandemic, borrowers who had loans were struggling to make payments. Lenders derived various measures to mitigate the harsh financial situation. 

Low-interest loans were available to help interested borrowers access funds. However, the necessary requirements such as credit score and verifiable income are still in place. Some lenders also had Covid-19 hardship loans that were easier to qualify. These loans had interest rates as low as 0%. 

Other positive measures were revisiting the loan terms such as extending the repayment periods. This helped people have adequate time to make the payments during the crisis. More generous guarantee programs were associated with lending. This was after some banks and other financial institutions halted the lending processes due to fear of the pandemic.

What to Check Before Applying for a Personal Loan

Before you apply for a personal loan, you need to be prepared. The following check list will help you make the appropriate adjustments or gather the correct documentation to apply for a personal loan. Use it as your reference to obtain a loan at a reasonable rate of interest.

Check Your Credit Score

The decision for funding a personal loan often depends on your credit rating or score. A credit score may range from 300 to 850. Therefore, the APR for the loan will depend, to a great extent, on the score and your financial history.

Again, if the credit score is lower, the interest rate will be higher than what it will be for a credit rating that is higher. You can usually receive the funds in 1 to 2 days by direct deposit in your bank account

Check Your Payment History

Most lenders will determine personal loan approval on 35% of your FICO score or credit rating, based on payment history. Naturally, a lender wants to play it safe, so he or she has to look for any red flags when it comes to your payment history.

For example, if you have several missed payments or late payments, you may need to make some adjustments. Make a commitment to paying all your bills on time to improve your standing in this area. It also helps to sign up for automatic withdrawals so you don’t forget to pay your monthly obligations.

However, with that being said, it does not mean you won’t get the loan for a few missed payments. If you have a good reason for missing the payments, the lender will also consider this factor. In addition, some lenders will still approve the loan, as they will just charge an interest rate that is a bit higher.

Check Your Credit Utilization Ratio

If you want to apply for a personal loan, you need to check your credit utilization ratio as well. This percentage represents the amount of outstanding credit card debt you have in relation to your credit limits.

The credit utilization ratio accounts for 30% of your credit rating or FICO score. Basically, a lender looks at how much credit you currently have and how much credit you have available. The lower the ratio, the better. When you compare personal loan companies, keep this factor in mind.

Check Out Other Credit Factors

Besides checking your payment history and utilization of credit, you also need to review other factors that contribute to your credit score. These factors include the length of your credit history (how long you have been using credit) and the number of new credit applications you have recently completed. A longer credit history and applying for fewer credit offers will increase your score.

Check Your Financial Data

In addition, you need to look at how you will appear to a lender in terms of work history, current earnings, and what you currently have in total debt. The lender merely wants to know if you can repay the loan once you receive the money. Therefore, if you make more money, have more assets, and have acquired minimal debt, you will look better in a lender’s eyes.

Check Your Current Credit Score and See What Activities Have Affected Its Rating

The main thing you have to keep in mind, when applying for a personal loan, is your credit score rating. This rating is important, as it determines how much interest you will have to pay on the loan amount. When you compare personal loan companies and review their services, they will give you the interest rates for specific credit ratings.

Check to Make Sure You Have the Appropriate Information and Documents

When applying for a personal loan, you should produce documentation that includes a government-issued I.D. (for proof of age and residence); tax information for earnings; payment stubs; and any other data that will help you secure a loan.

For example, some personal loan vendors require that you show proof of auto insurance and a vehicle title when applying for a personal loan. Based on the lender’s requirements, have this type of information ready when applying for a personal loan.

If you prepare yourself properly, you will know what to expect and feel more confident when facilitating personal loan funding online. Using this source of funding can bode well for you as long as you can use the money for something that will improve your lifestyle.

Personal Loans FAQs

How can I use a personal loan?

Who can qualify for a personal loan?

What information should I provide the lender when applying for a personal loan?

How much can I borrow and for how long?

Can personal loans be refinanced?

Do all personal loans come from banks?

What are the requirements for a personal loan?