What is a Personal Loan?

A personal loan is a financial tool that allows individuals to borrow a fixed amount of money from a lender and repay it in installments unlike secured loans, such as mortgages or auto loans, most personal loans are unsecured, meaning they don’t require any collateral like a home or vehicle to back them up.

This feature makes personal loans appealing to borrowers who may not want to risk their assets. Lenders determine eligibility and interest rates based on factors like credit score, income, and financial history. Personal loans usually come with a fixed interest rate, so the borrower pays the same amount each month, which simplifies budgeting.

Why Should You Consider a Personal Loan?

There are several reasons why someone might consider a personal loan. First, personal loans can be an excellent way to consolidate high-interest debt, such as credit card balances. By combining multiple debts into one loan with a lower interest rate, borrowers can potentially save on interest payments and simplify their finances by having a single monthly payment. Additionally, paying off high-interest credit card debt with a personal loan may positively impact a borrower’s credit score by lowering credit utilization—a factor that influences credit scores.

Another reason to consider a personal loan is for financing large purchases or life events. Personal loans can provide the funds needed for major expenses like home improvements, medical bills, weddings, or vacations. Unlike credit cards, which often have high interest rates and can accumulate quickly, personal loans give borrowers a clear payment plan, with a set repayment schedule and end date.

Personal loans can also help build or improve credit. Successfully repaying a personal loan demonstrates financial responsibility and can have a positive effect on credit history, which is especially beneficial for individuals aiming to improve their credit for future loans, such as a mortgage. However, it’s essential to carefully assess your financial situation before taking out a personal loan. While a personal loan can be an effective financial tool, it’s still a debt that must be repaid on time to avoid late fees, credit score damage, or additional interest charges.

In summary, a personal loan can be a smart choice for consolidating debt, funding significant purchases, or improving credit—provided it aligns with your financial goals and budget. As with any financial decision, understanding the terms, interest rates, and repayment obligations is key to making the most of a personal loan.

What is a Debt Consolidation Loan?

A debt consolidation loan is a type of personal loan designed to combine multiple existing debts into a single, manageable loan. By merging debts such as credit card balances, medical bills, or other high-interest loans, a debt consolidation loan can simplify monthly payments and potentially reduce overall interest costs. This loan is typically offered at a fixed interest rate with set monthly payments over a specified term, making it easier to budget and track repayment.

Debt consolidation loans are especially helpful for individuals who are juggling multiple high-interest debts, as they may offer a lower interest rate than many credit cards or unsecured loans. The primary benefit is financial simplification—one monthly payment instead of many—and potential savings on interest over time. However, borrowers need to remain disciplined and avoid accumulating new debt to make the most of this solution.

What is a Credit Card Consolidation Loan?

A credit card consolidation loan is a personal loan designed to help individuals combine multiple credit card balances into one manageable loan. By consolidating credit card debt, this loan can simplify monthly payments and may reduce the overall interest cost, especially if the consolidation loan offers a lower interest rate than the credit cards being paid off.

Credit card consolidation loans usually come with a fixed interest rate and a set repayment term, so borrowers know exactly how much they’ll pay each month and when the debt will be fully repaid.

The primary advantage of a credit card consolidation loan is that it streamlines finances, reducing the need to juggle multiple card payments with varying due dates and interest rates. It can also positively impact credit scores by lowering credit utilization, as credit card balances are paid down. However, it's essential to avoid accumulating new credit card debt to fully benefit from the consolidation loan’s advantages.

Applying For a Personal Loan – What to Know?

Applying for a personal loan can be a useful financial decision if you need to cover expenses or consolidate debt. However, understanding the factors that impact loan terms, interest rates, and approval can help ensure you make the best choice. Here are key points to consider in each of these areas when applying for a personal loan:

1. Your Credit Score

Your credit score is one of the most important factors lenders consider when you apply for a personal loan. This three-digit number, typically ranging from 300 to 850, reflects your credit history, including factors like loan repayment history, credit card usage, and overall debt levels. The higher your credit score, the more creditworthy you appear to lenders, increasing your chances of loan approval and securing a favorable interest rate.

Generally, a score of 670 or higher is considered good, while a score above 740 is excellent. Knowing your credit score before applying for a loan is essential, as it will help you understand which loans you may qualify for and anticipate the kind of rates you’re likely to receive.

2. Bad Credit Loans

If you have a credit score below 630, it’s considered a “bad” or “poor” score. Having bad credit can make it challenging to get approved for a personal loan with favorable terms, but it’s still possible. Many lenders specialize in loans for individuals with low credit scores, though the terms and rates may be less favorable, with higher interest rates and stricter repayment requirements.

Some ways to improve your loan application with bad credit include applying with a cosigner who has better credit, providing collateral (such as a car or savings account), or working with lenders that don’t prioritize credit scores as heavily in their approval criteria.

Additionally, taking steps to improve your credit score before applying, such as paying off outstanding debts or correcting errors on your credit report, can increase your chances of qualifying for better loan terms.

3. How Do Personal Loans Interest Rates Work?

Interest rates represent the cost of borrowing money, expressed as a percentage of the loan amount. For personal loans, interest rates can vary based on your credit score, loan term, and other financial factors. Generally, personal loan interest rates are fixed, meaning the rate remains constant throughout the repayment period. However, some loans may offer variable rates that fluctuate based on market conditions.

When comparing personal loans, it’s essential to pay attention to the interest rate, as it significantly impacts the overall cost of the loan. A lower interest rate means lower monthly payments and less total interest paid over the life of the loan, which can make a big difference in affordability.

4. What Affects Personal Loans Interest Rates?

Several factors influence the interest rate you’ll receive on a personal loan. These include:

• Credit Score: A higher credit score indicates a lower risk to lenders, which can result in a lower interest rate. Conversely, a lower credit score typically leads to higher interest rates.
• Income Level: Lenders look at your income to assess your ability to repay the loan. A higher, stable income may help you secure a lower rate, as lenders view it as a sign of reliability.
• Loan Amount: Larger loan amounts may come with higher rates due to the increased risk to the lender.
• Loan Term: Shorter loan terms generally have lower interest rates but higher monthly payments. Longer terms can have higher interest rates but lower monthly payments.
• Debt-to-Income Ratio (DTI): This ratio compares your monthly debt payments to your monthly income. A lower DTI suggests financial stability and may result in a lower interest rate.

Understanding these factors can help you better position yourself to receive a favorable rate. For example, if you can raise your credit score or pay down other debts to lower your DTI, you might qualify for a more affordable loan.

5. What is an APR?

The annual percentage rate (APR) represents the total cost of a loan on a yearly basis, including the interest rate and any additional fees or charges. Unlike the interest rate, the APR provides a more comprehensive view of what you’ll pay over the life of the loan, making it a crucial factor to compare when shopping for personal loans.

A lower APR means you’ll pay less in fees and interest, resulting in a more cost-effective loan. When evaluating loan options, it’s essential to check the APR as well as the interest rate to fully understand the cost and choose the best loan for your needs. APR usually ranges between 6.99% to 35.99%. Below 11% is considered a good APR. The APR rates mentioned include associated fees.

6. Loan Amount Approval Factors

The amount you can be approved for depends on several factors, including your income, credit score, debt-to-income ratio, and the lender’s specific criteria. Lenders assess your financial health to determine the loan amount they’re comfortable offering, balancing their risk with your repayment ability.

While some lenders may offer up to $100,000 for a personal loan, others have lower limits. When deciding how much to apply for, consider both your needs and your ability to handle the monthly payments. Applying for more than you need can lead to higher debt and interest payments, while asking for too little might not cover your intended expenses.

7. Short-Term or Long-Term Personal Loans

The loan term is the period over which you agree to repay the loan. Personal loan terms typically range from 1 to 7 years, though some lenders may offer longer terms. Shorter loan terms generally mean higher monthly payments but less interest paid over the life of the loan, making them more affordable in the long run. Longer terms, on the other hand, reduce the monthly payment but increase the total interest, which raises the loan’s overall cost.

Choosing the right term depends on your financial situation and monthly budget. If you can manage higher payments, a shorter term can save you money in interest. However, if your budget is tight, opting for a longer term with smaller payments may be more manageable.

By understanding these elements, you can make informed decisions about a personal loan that best meets your financial needs. Evaluating your credit score, interest rates, APR, loan amount, and term can help ensure that you choose a loan you can afford and manage effectively. Remember that personal loans are financial commitments, so taking the time to assess each factor can make a big difference in achieving your financial goals responsibly.

Apply For a Personal Loan Online

The best online lenders typically offer a simpler loan application process compared to traditional banks. Here are the stages you can expect:

Stage 1: This first stage usually involves an online form where you provide details such as the loan amount desired, the purpose of the loan, and your personal information. You’ll also be likely asked for other details such as your income and housing status.

Stage 2: Next, a soft credit check is conducted, which won’t impact your credit score. Based on your credit score and the information you provided, the lender assesses how much they can offer you, along with potential terms and interest rates.

Stage 3: Once pre-approved, you’ll complete the full application, which includes a hard credit pull that may affect your credit score. Have your documents ready, such as a driver’s license or passport, proof of residence (like a utility bill or lease), and recent pay stubs from your employer.

Co-signer Loan Application:

Many top lenders offer co-signer loans. Start by finding a lender that allows co-signers on your loan based on your credit level, then review their fees and terms.

Next, look for a suitable co-signer who is willing to share in the responsibility for making payments if you, the borrower, are unable to. While involving loved ones in financial matters can be tricky, sometimes turning to someone close to you is necessary. A co-signer with a stronger credit score—and ideally some collateral—can help you secure a loan with better terms.

However, remember that if you miss payments, it will impact your co-signer’s financial record too. Choose someone supportive who won’t hold this over you and with whom you can coordinate on repaying the debt.

Choosing a Personal Loan Lender:

Determine Your Needs: To choose the best personal loan provider, first determine your needs as a borrower, compare lenders, and find the one that best meets your requirements at a competitive rate. Some key criteria to consider when comparing loan providers include:

1. Maximum Loan Amount: Some online lenders offer up to $20,000, while others can provide as much as $100,000.
2. APR: Different lenders offer varying APRs, so look for rates that you can manage comfortably.
3. Loan Term: Loan durations range from a few months to several years, so confirm with your lender how long you’ll have to repay.
4. Qualifications: Some lenders have strict credit requirements, while others are more flexible. You may also need to show proof of employment or income. Check each lender’s basic criteria to avoid wasting time applying for loans you don’t qualify for.
5. Simplicity and Speed: Online lenders often streamline the application process, making it faster and easier. Some can even transfer funds to you within days.
6. Smart Comparison: With AmONE comparison tools, you can easily compare the best personal loans, best consolidation loans, best lenders, and best loan rates.
7. Compare Multiple Top Lenders: It may seem obvious but don’t settle for the first lender you find. Take time to research and compare several best personal loan companies by reading reviews and analyzing options to secure the most competitive rates. If a lender’s terms aren’t favorable, explore other options. Remember, as the customer, you have the upper hand—lenders want your business and may be willing to negotiate.
8. Ensure the Lender is Trustworthy: Verify the lender’s reputation: Do they have positive reviews, minimal complaints, and responsive customer service? Review the company’s background to confirm it’s legitimate, established, and maintains a solid reputation with clients.
9. Review Fees and Charges: The cost of a loan is more than just interest and the principal amount—it often includes origination fees, late fees, and other charges. Make sure these additional fees won’t be burdensome, and factor them into your decision.

†Credible Terms & Conditions:

Credible is so confident in the personal loan rates you’ll find on Credible, we’ll give you $200 if you find and close with a better rate elsewhere. See full  terms and conditions

Personal Loans Rate and Terms Disclosure: Rates for personal loans provided by lenders on the Credible platform range between 6.94% - 35.99% APR with terms from 12 to 120 months. Credible also works with network Partners like MoneyLion and AmONE, who offer loan and other products with different rates and terms than described here. Rates presented include lender discounts for enrolling in autopay and loyalty programs, where applicable. Actual rates may be different from the rates advertised and/or shown and will be based on the lender’s eligibility criteria, which include factors such as credit score, loan amount, loan term, credit usage and history, and vary based on loan purpose. The lowest rates available typically require excellent credit, and for some lenders, may be reserved for specific loan purposes and/or shorter loan terms. The origination fee charged by the lenders on our platform ranges from 0% to 12%. Each lender has their own qualification criteria with respect to their autopay and loyalty discounts (e.g., some lenders require the borrower to elect autopay prior to loan funding in order to qualify for the autopay discount). All rates are determined by the lender and must be agreed upon between the borrower and the borrower’s chosen lender. For a loan of $10,000 with a three year repayment period, an interest rate of 7.99%, a $350 origination fee and an APR of 10.43%, the borrower will receive $9,650 at the time of loan funding and will make 36 monthly payments of $313.32, assuming your lender deducts the origination fee from the offered loan amount. Assuming all on-time payments, and full performance of all terms and conditions of the loan contract and any discount programs enrolled in included in the APR/interest rate throughout the life of the loan, the borrower will pay a total of $11,279.43. As of March 3, 2022, none of the lenders on our platform require a down payment nor do they charge any prepayment penalties.

*LightStream Terms & Conditions: 

*Your loan terms, including APR, may differ based on loan purpose, amount, term length, and your credit profile. Rate is quoted with AutoPay discount. AutoPay discount is only available prior to loan funding. Rates without AutoPay may be higher. Subject to credit approval. Conditions and limitations apply. Advertised rates and terms are subject to change without notice. Payment example: Monthly payments for a $10,000 loan at 4.99% APR with a term of 3 years would result in 36 monthly payments of $299.66. SunTrust now Truist is an Equal Housing Lender. © 2020 Truist Financial Corporation. SunTrust®, Truist, LightStream®, the LightStream logo, and the SunTrust logo are service marks of Trust Financial Corporation. All rights reserved. All other trademarks are the property of their respective owners. Lending services provided by SunTrust now Truist Bank. You can fund your loan today if today is a banking business day, your application is approved, and you complete the following steps by 2:30 p.m. Eastern time: (1) review and electronically sign your loan agreement; (2) provide us with your funding preferences and relevant banking information; and (3) complete the final verification process. After receiving your loan from us, if you are not completely satisfied with your experience, please contact us. We will email you a questionnaire so we can improve our services. When we receive your completed questionnaire, we will send you $100. Our guarantee expires 30 days after you receive your loan. We reserve the right to change or discontinue our guarantee at any time. Limited to one $100 payment per funded loan. Truist teammates do not qualify for the Loan Experience Guarantee.

‡ Upgrade Terms & Conditions:

Personal loans made through Upgrade feature Annual Percentage Rates (APRs) of 9.99%-35.99%. All personal loans have a 1.85% to 9.99% origination fee, which is deducted from the loan proceeds. Lowest rates require Autopay and paying off a portion of existing debt directly. Loans feature repayment terms of 24 to 84 months. For example, if you receive a $10,000 loan with a 36-month term and a 17.59% APR (which includes a 13.94% yearly interest rate and a 5% one-time origination fee), you would receive $9,500 in your account and would have a required monthly payment of $341.48. Over the life of the loan, your payments would total $12,293.46. The APR on your loan may be higher or lower and your loan offers may not have multiple term lengths available. Actual rate depends on credit score, credit usage history, loan term, and other factors. Late payments or subsequent charges and fees may increase the cost of your fixed rate loan. There is no fee or penalty for repaying a loan early. Personal loans issued by Upgrade's bank partners. Information on Upgrade's bank partners can be found at  https://www.upgrade.com/bank-partners/.

* Best Egg Terms & Conditions:

*Trustpilot TrustScore as of December 2022. Best Egg loans are personal loans made by Cross River Bank, a New Jersey State Chartered Commercial Bank, Member FDIC, Equal Housing Lender or Blue Ridge Bank, N.A., Member FDIC, Equal Housing Lender. The Best Egg Credit Card is issued exclusively by First Bank & Trust, Member FDIC, Brookings SD pursuant to a license by Visa International. Visa is a registered trademark, and the Visa logo design is a trademark of Visa International Incorporated. “Best Egg” is a trademark of Best Egg Technologies, LLC. Offers may be sent pursuant to a joint marketing agreement between Cross River Bank, Blue Ridge Bank, N.A. and/or First Bank & Trust and Marlette Marketing, LLC, a subsidiary of Best Egg, Inc.

The term, amount, and APR of any loan we offer to you will depend on your credit score, income, debt payment obligations, loan amount, credit history and other factors. Your loan agreement will contain specific terms and conditions. About half of our customers get their money the next day. After successful verification, your money can be deposited in your bank account within 1-3 business days. The timing of available funds upon loan approval may vary depending upon your bank’s policies. Loan amounts range from $2,000– $50,000. Residents of Massachusetts have a minimum loan amount of $6,500 ; Ohio, $5,001; and Georgia, $3,001. For a second Best Egg loan, your total existing Best Egg loan balances cannot exceed $100,000. Annual Percentage Rates (APRs) range from 6.99%–35.99%. The APR is the cost of credit as a yearly rate and reflects both your interest rate and an origination fee of 0.99%– 9.99% of your loan amount, which will be deducted from any loan proceeds you receive. The origination fee on a loan term 4-years or longer will be at least 4.99%. Your loan term will impact your APR, which may be higher than our lowest advertised rate.

You need a minimum 700 FICO® score and a minimum individual annual income of $100,000 to qualify for our lowest APR. For example: a 5‐year $10,000 loan with 9.99% APR has 60 scheduled monthly payments of $201.81, and a 3‐year $5,000 loan with 7.99% APR has 36 scheduled monthly payments of $155.12. To help the government fight the funding of terrorism and money laundering activities, Federal law requires all financial institutions to obtain, verify, and record information that identifies each person who opens an account. What this means for you: When you open an account, we will ask for your name, address, date of birth, and other information that will allow us to identify you. We may also ask to see your driver’s license or other identifying documents. Best Egg products are not available if you live in Iowa, Vermont, West Virginia, the District of Columbia, or U.S. Territories.

TO REPORT A PROBLEM OR COMPLAINT WITH THIS LENDER, YOU MAY WRITE OR CALL– Operations Manager, Email: [email protected], Address: P.O. Box 42912, Philadelphia, PA 19101, Phone: 1-855-282-6353. This lender is licensed and regulated by the New Mexico Regulation and Licensing Department, Financial Institutions Division, P.O. Box 25101, 2550 Cerrillos Road, Santa Fe, New Mexico 87504. To report any unresolved problems or complaints, contact the division by telephone at (505) 476-4885 or visit the website https://www.rld.nm.gov/financial-institutions/