)
)
Mandy Sleight has over 15 years of insurance knowledge and expertise in auto, home, life, health, pet, supplemental benefits, and other insurance products. She’s a sought-after insurance expert, appearing in Bankrate.com, Moneygeek.com, U.S. News & World Report, Reviews.com, CNET, and other publications, and she's been writing for Compare.com since 2023.
Mandy uses her background and experience working for well-known insurance companies like State Farm and Nationwide Insurance to create engaging and easy-to-understand content that helps readers make smarter insurance choices that have a positive effect on their budgets and finances.
)
)
Nick Versaw leads Compare.com's editorial department, where he and his team specialize in crafting helpful, easy-to-understand content about car insurance and other related topics. With nearly a decade of experience writing and editing insurance and personal finance articles, his work has helped readers discover substantial savings on necessary expenses, including insurance, transportation, health care, and more. As an award-winning writer, Nick has seen his work published in countless renowned publications, such as the Washington Post, Los Angeles Times, and U.S. News & World Report. He graduated with Latin honors from Virginia Commonwealth University, where he earned his Bachelor's Degree in Digital Journalism.
)
)
Licensed property and casualty insurance agent
10+ years editing experience
NPN: 20461358
John Leach is a licensed insurance agent who reviews and fact-checks articles for Compare.com. John has several years of experience reviewing and editing various insurance topics, and he also holds a valid personal lines producer license from the California Department of Insurance (NPN #20461358).
Updated
At Compare.com, it’s our mission to give you the tools to find the best (and most affordable) insurance for your unique needs and budget. We strive to provide information that’s helpful, clear, and unbiased, and we believe that comparing insurance companies should never put you at risk of spam. Our editorial team — which is made up of experienced writers, editors, insurance agents, and data analysts — has spent thousands of hours researching and creating the coverage overviews, side-by-side comparisons, and detailed reviews you see across our site.
While we make money through partnerships with some of the brands we discuss in our articles, our editorial team operates 100% independently, and these partners never influence or affect the topics, reviews, ratings, or recommendations we provide. We never guarantee favorable reviews or mentions in exchange for compensation from any brands or partners, and we uphold strict editorial standards to ensure our content is always independent, truthful, and unbiased.
A personal loan is a lump-sum installment loan that lets you borrow money for a wide range of expenses and repay it over time, with interest. Borrowers commonly use personal loans to consolidate high-interest debt and fund home improvement projects.
While personal loans are widely available, borrowers with strong credit typically qualify for lower rates and better terms than people with poor credit.
This guide explains what personal loans are, how they work, and what their average rates are. You’ll also learn about eligibility requirements, borrowing limits, funding timelines, and strategies for loan approval.
Personal loans usually have fixed monthly payments and a clear payoff timeline, making them easier to budget for than revolving debt like credit cards.
Borrowers with good credit often qualify for higher loan amounts, lower interest rates, and better repayment terms.
Many people use personal loans to consolidate debt, cover home improvements, pay medical bills, or finance large purchases.
Simply put, a personal loan is an installment loan. You borrow a specific amount of money from a bank or lender and repay it in equal monthly payments, with interest, over a set term — usually two to seven years.[1]
Most personal loans are unsecured loans, meaning you don’t need collateral like a house or car. But some lenders offer secured loans that require collateral to get a lower interest rate.
Personal loans typically have fixed rates and a clear payoff timeline, so your monthly payments stay the same for the life of the loan. Credit cards, on the other hand, usually have variable rates that can rise over time.
In many situations, personal loans are a better choice than credit cards because it’s easier to predict costs, pay down debt faster, and avoid revolving balances that can grow month after month.
Compare several top personal loan options side by side.
If you want to qualify for a personal loan, here are the minimum requirements you typically have to meet:
Credit score: You usually need a score of at least 580–660.[2]
Stable income: Lenders want to see that you can comfortably afford the monthly payments to repay the loan.
Debt-to-income (DTI) ratio: Your DTI ratio is the percentage of your gross monthly income that goes toward your debts. Lenders usually want to see a DTI ratio of 36% or less.[3]
Your credit history is a major factor in your loan approval, interest rate, and loan terms. Lenders consider borrowers with credit scores of 660 or higher to be “prime” borrowers, and they usually qualify for higher loan amounts and the most competitive interest rates.
Lenders also verify income during the application process. They’ll usually ask for recent pay stubs, tax returns, bank statements, or employer verification to confirm you can meet the loan repayment terms.
)
Personal loan borrowing amounts vary by lender. Most personal loans range anywhere from $1,000 to $50,000. But some lenders offer loans of up to $100,000 for borrowers with excellent credit. The maximum loan amount you qualify for depends on your credit history, income, DTI ratio, and loan terms.
You should consider the total cost of the loan, not just the monthly payments, when deciding how much you should borrow. It’s usually best to borrow only what you need, since larger loan amounts mean paying more interest overall.
When you take out a personal loan, the lender gives you a lump sum of money up front. You then repay it in fixed monthly installments over a set term, usually two to seven years. Because the rate and payment schedule are fixed, you know exactly how much interest you’ll pay and when the loan will be paid off.
Some lenders charge an origination fee to disburse the loan, which is typically 0.5% to 10% of the total loan amount. Lenders usually deduct the fee from the loan before depositing funds in your bank account. So the amount you receive is slightly less than the total loan amount.[4]
Unlike credit cards, which allow balances to revolve indefinitely, personal loans come with a clear end date. This structure makes repayment easier to manage, and making on-time loan payments can help improve your credit over time.
Here’s an overview of some common terms you’ll likely encounter when applying for a personal loan:
Term  | What It Means |
|---|---|
| Annual percentage rate (APR) | Includes interest and fees to show the true yearly cost of borrowing |
| Origination fee | A one-time fee some lenders charge to process, underwrite, and fund the loan |
| Loan term | The length of time you have to repay the loan |
| Monthly payment | The fixed amount you pay each month toward the loan |
| Total repayment cost | The full amount you’ll repay over time, including principal, interest, and fees |
Personal loans are flexible, but they aren’t meant for everything. People typically use personal loans for:
Debt consolidation: Pay off high-interest credit cards or debt with a lower-rate personal loan.
Home improvement projects: Fund renovations faster than a home equity line of credit (HELOC) and without having to tap into your home’s equity.
Emergency expenses: Cover unexpected expenses, such as home repairs, vehicle repairs, or vet bills.
Medical costs: Pay for procedures, bills, or a high deductible that your health insurance doesn’t cover.
Major purchases: Pay for appliances, furniture, or other large purchases, like a wedding or moving.
Lenders usually prohibit using personal loans for gambling, illegal activity, tuition, business expenses, and down payments on a house.
It’s important to weigh the financial advantages and risks of borrowing to ensure a personal loan fits your budget and goals.
Fixed monthly loan payments
Can consolidate high-interest debt
Quick access to funds
No collateral needed for unsecured loans
Immediate payments required
May come with fees or prepayment penalties
Interest rates can be higher than secured loans
Late or missed payments hurt your credit score
)
Follow this step-by-step process to get a personal loan:
Check your credit score. Review your credit report for errors and check your score before applying. Fix any errors to boost your score and your credit-approval chances.
Prequalify with multiple lenders. Prequalification shows estimated loan offers without affecting your credit score.
Compare offers. Check the fees, monthly payment, and APR. The lowest payment isn’t always the most affordable loan option. Use a personal loan calculator to help you determine the best offer.
Apply and submit required documents. Complete the application and provide documents like proof of income, identification, and deposit account details.
Receive funds. Lenders typically deposit funds into your checking account within a few days of loan approval.
Maintain a good credit history. Make on-time payments to avoid late fees and help build your credit over time.
You can get a personal loan with bad credit, but you’ll pay more in interest. Personal loan rates average 11.65% for borrowers with good credit. But people with poor credit may see an APR as high as 36%.
Be cautious of payday loans and lenders that advertise “guaranteed approval” offers. These types of personal loans often come with low loan amounts and extremely high fees and rates — some with an APR of up to 400%.[5]
Instead, consider adding a co-signer, applying for a secured loan, or borrowing a smaller amount to improve your eligibility for a personal loan.
The time it takes to get a personal loan varies by lender and situation. Many online lenders can approve and fund a loan the same day or within a few business days, especially if you have good credit and have your documentation ready.
But traditional banks and credit unions may take a week or more to approve the loan and deposit funds.
See rates, monthly payments, and total loan amounts, no credit check required.
Below are answers to some of the most common questions borrowers ask when comparing loan options and deciding whether a personal loan fits their financial goals.
Loans for borrowers with bad credit are often the easiest to get approved for, but they usually come with low amounts and extremely high interest rates. You should avoid this type of loan whenever possible.
Secured personal loans usually offer higher loan amounts and lower interest rates because the lender can seize your property if you default on the loan.
It depends on your loan term and interest rate. For example, a $30,000 personal loan with a seven-year term and an APR of 4.5% would cost $417 per month. The same loan would cost more than $498 per month with an APR of 10%.
Personal loan rates can be fixed or variable, though fixed is more common. With fixed-rate loans, your monthly payment stays the same for the life of the loan. Variable-rate loans may start off with a lower interest rate, but your payment could increase if market rates rise.
Yes. But you should check whether your lender charges a prepayment penalty. If so, you would pay more in total loan costs when paying off your personal loan early.
The best personal loan company for you depends on your situation. The best companies offer free prequalification, no fees, and competitive rates. Some lenders offer discounts if you set up automatic payments, already have a checking or savings account, or have online banking with the lender.
The best way to find the right fit for your needs is to shop around and compare factors like loan amounts, monthly payments, terms, and APR.
Personal loans have multiple uses, including home improvement projects, debt consolidation, medical bills, and large purchases. Most lenders allow flexible use as long as you don’t use the loan for illegal activities or for business expenses.
It can. Prequalifying for a personal loan usually uses a soft credit check, which doesn’t affect your credit score. But submitting a full application or pre-approval typically triggers a hard inquiry, which may cause a small, temporary drop in your score.
)
Mandy Sleight has over 15 years of insurance knowledge and expertise in auto, home, life, health, pet, supplemental benefits, and other insurance products. She’s a sought-after insurance expert, appearing in Bankrate.com, Moneygeek.com, U.S. News & World Report, Reviews.com, CNET, and other publications, and she's been writing for Compare.com since 2023.
Mandy uses her background and experience working for well-known insurance companies like State Farm and Nationwide Insurance to create engaging and easy-to-understand content that helps readers make smarter insurance choices that have a positive effect on their budgets and finances.
Nick Versaw leads Compare.com's editorial department, where he and his team specialize in crafting helpful, easy-to-understand content about car insurance and other related topics. With nearly a decade of experience writing and editing insurance and personal finance articles, his work has helped readers discover substantial savings on necessary expenses, including insurance, transportation, health care, and more. As an award-winning writer, Nick has seen his work published in countless renowned publications, such as the Washington Post, Los Angeles Times, and U.S. News & World Report. He graduated with Latin honors from Virginia Commonwealth University, where he earned his Bachelor's Degree in Digital Journalism.
Licensed property and casualty insurance agent
10+ years editing experience
NPN: 20461358
John Leach is a licensed insurance agent who reviews and fact-checks articles for Compare.com. John has several years of experience reviewing and editing various insurance topics, and he also holds a valid personal lines producer license from the California Department of Insurance (NPN #20461358).
