What Is a Personal Loan?

A personal loan refers to a type of credit you can use for various purposes. Depending on your needs, you can take out a personal loan to pay for large expenses like medical emergencies, home renovations, vacations, funeral expenses or high-interest debts. You can also take out personal loans to start a business, begin investing, consolidate pre-existing debts, build credit and finance major life events like moving to a new home, divorce, a wedding or a career change.

You can use personal loans to cover almost any expense. However, there are certain restrictions. Lenders prohibit using personal loan proceeds for illegal activities and gambling.

There may also be lender-specific rules. For instance, some companies may not allow you to use personal loans to pay for higher education. To avoid problems, it’s best to always verify with the lender.

How to Compare Personal Loans

Taking out a personal loan can be a great option if you need immediate access to funds. However, ensuring you get the best possible offer based on your needs is vital.

  1. Find the right loan amount and term: Before applying, determine how much money you’ll need. You should also consider the repayment term. These factors help determine the total cost of the loan and your monthly payments.
  2. Check interest rates and other fees: Interest rates may vary per lender, loan amount and repayment term. There may also be origination, late payment and prepayment fees. Make sure you read the fine print to avoid unexpected costs.
  3. Review the requirements and application process: Qualification requirements and the application process will depend on the loan provider. Lenders typically consider credit score, income, debt-to-income ratio and employment history.
  4. Determine funding time: Funding time also varies per lender. Some lenders offer same-day or next-day funding. Others may take a few business days or weeks to release funds.

You may also use an online loan calculator to estimate how much it may cost you to repay a personal loan.

Best Overall: SoFi

  • SoFi

    • 5.74% to 20.28%APR Range
    • 680Minimum Credit Score
    • $5,000 to $100,000Loan Amount Range
    • 12 to 60 monthsRepayment Terms
    • Two DaysTime to Receive Funds

    on SoFi Website

Best for Debt Consolidation: LightStream

  • LightStream

    • 4.49% to 20.49%APR Range
    • 660Minimum Credit Score
    • $5,000 to $100,000Loan Amount Range
    • 24 to 84 monthsRepayment Terms
    • Same DayTime to Receive Funds

    on LightStream Website

Best for Bad Credit: Upgrade

  • Upgrade

    • 5.94% to 35.47%APR Range
    • 560Minimum Credit Score
    • $1,000 to $50,000Loan Amount Range
    • 36 to 60 monthsRepayment Terms
    • Same DayTime to Receive Funds

    on Upgrade Website

Best for Low Rates: Marcus by Goldman Sachs

  • Marcus by Goldman Sachs

    • 6.99% to 19.99%APR Range
    • 660Minimum Credit Score
    • $3,500 to $40,000Loan Amount Range
    • 36 to 84 monthsRepayment Terms
    • Same DayTime to Receive Funds

Best for Those With Low Income: LendingClub

  • Lending Club

    • 7.04% to 35.89%APR Range
    • 600Minimum Credit Score
    • $1,000 to $40,000Loan Amount Range
    • 36 to 60 monthsRepayment Terms
    • Next DayTime to Receive Funds

    on Lending Club Website

Types of Personal Loans

There are different types of personal loans. Among the most common are unsecured, secured and co-signed.

  • Unsecured: A personal loan that doesn’t require you to use an asset as collateral. Lenders evaluate creditworthiness and finances to determine whether you can repay the loan. Interest rates for this type of loan tend to be higher.
  • Secured: A loan that requires collateral. Since you use a valuable asset to back the loan, you risk losing it if you default on your payments.
  • Co-signed: You may need a co-signer to get approved for a loan. Should you fail to make loan payments, the co-signer assumes responsibility.

Aside from these, there are also different loan types based on certain factors like credit score, income and purpose.

Excellent-Credit Loans

Generally, you can choose how to spend personal loan proceeds. For instance, you can take out a loan to recover from a financial crisis or cover large expenses like a home renovation.

That said, lenders have certain qualification requirements. One of the most crucial factors they consider is the credit score.

Your credit score can help determine the loan amount you’re eligible to get and the interest rate for repayment. A very good FICO credit score is 740–799 and an excellent FICO credit score is 800 and higher. An excellent credit score allows you to access more loan options. It also increases your chances of getting approved for a loan. Additionally, many lenders offer their lowest interest rates to individuals with excellent credit scores.

Good-Credit Loans

Having good credit makes getting approval for a personal loan easier. In some cases, lenders may even require borrowers to have at least good credit.

Lenders check credit scores to determine a person’s creditworthiness and credit risk. A good credit score of 670–739 for FICO and 661–780 for VantageScore allows you to find more favorable terms like lower interest rates.

Aside from your credit score, you should also consider other factors. For instance, check if your chosen lender restricts your use of the loan funds. If not, you may use the money for anything.

Fair-Credit Loans

A fair credit rating may limit your choices. Although you can still take out loans, you may have less-than-ideal terms. You may get higher interest rates than individuals with good or excellent credit scores. A fair FICO score is 580–669, while a fair VantageScore is 601–660.

A personal loan can help you purchase new appliances, finance your wedding or fund your education. However, make sure the terms are favorable to you. Conducting research and comparing your options can help you find the best possible option.

Bad-Credit Loans

You can get personal loans for many reasons, such as to address financial emergencies, adjust to a life-altering event like marriage or divorce, and start a business. However, not all borrowers get approved. Lenders consider various factors to evaluate an individual’s risk level.

Having a bad credit rating makes it harder for you to get approval. But that doesn’t mean you can no longer take out a personal loan. You may, however, get high interest rates. Your loan amount options may also be limited.

Credit scores are three-digit numbers that are calculated by FICO or VantageScore. A bad FICO credit score ranges from 300 to 850. A VantageScore of 300–600 is considered a bad rating.

Debt Consolidation Loans

A personal loan can help you manage your high-interest debts by combining them into a single account. Instead of handling multiple repayments, you only need to make a single monthly payment. This is why debt consolidation is one of the most common reasons to take out personal loans.

That said, it’s important to remember that a personal loan is still a type of debt. You have to pay back the principal loan amount, interest and other fees applicable. So, it only makes sense to take out a personal loan for debt consolidation if you’re eligible for interest rates lower than that of your current debt.

Low-Income Loans

Another factor lenders consider when determining whether a person is qualified to get a personal loan is income. Some lenders impose minimum income requirements, making it harder for low-income individuals to secure a loan.

That said, some companies have more relaxed eligibility requirements and offers specifically for low-income borrowers.

Whether it’s for paying off debts, improving your credit score or meeting an emergency, keep in mind that a personal loan is a commitment. You need to make monthly payments. Aside from the principal amount, consider the interest as well. Depending on the lender, there may also be other fees.

How to Choose a Personal Loan

The process of taking out a personal loan may vary per lender. But there are common steps. For instance, most lenders consider credit scores, income, employment and current debts when determining whether to approve or reject an application. Preparing these pieces of information ahead of time can help you sort through your options and find loan offers you qualify for.

MoneyGeek breaks down the general steps to help you get started.


Ask Yourself Important Questions

You first need to evaluate your needs and financial situation. Consider the following questions:

  1. How much funding do you need? You can find personal loans as low as $1,000. The maximum amount you can get depends on the lender and your creditworthiness.
  2. What’s your credit score? Most lenders require a minimum credit score. If you have new or no credit, you may have to explore other options.
  3. Can you afford the monthly payments? Review your monthly budget. If possible, establish a maximum amount for monthly loan payments.
  4. Do you have existing debts? Lenders may also have a debt-to-income ratio requirement. This helps them ensure that you can pay back the loan.
  5. Is your debt manageable through other means? Consider other ways to settle your debts first because a personal loan is still a form of debt.

Do Your Research

A personal loan is a long-term commitment. On average, personal loan borrowers make monthly payments for 2 – 4 years.

The application process may also have repercussions. For instance, some lenders may only conduct a soft credit inquiry. Others may do a hard credit check, which impacts your credit rating.

MoneyGeek reviewed multiple personal loan providers and compiled the best lenders based on specific borrower profiles. However, the recommendations may not be perfect for you. It’s still best to explore other options available to you.


Read the Fine Print

When researching private loans, you may miss certain details. Because of this, you could end up facing unexpected charges.

Once you have chosen a lender and loan offer, read the fine print. Review all details. Look into all types of fees, such as late, prepayment and origination fees. This could help you save money in the long run.

It could also help to check for available discounts and special offers. For example, many lenders offer automatic payment discounts.



You need to be 100% sure that a personal loan is your best option. Once you have researched and reviewed lenders’ terms, take a day or two to decide. You can also use this time to choose a lender.



If you have collected all the important details and are sure about a loan offer, proceed with the application. The process may differ per lender. Some may require in-person submission, while others offer online applications. Although completing the process online may be more convenient, there’s no harm in visiting or calling the lender if it helps you clarify details.

You should also determine the requirements you need to submit. Gather all of them before applying. Typically, lenders require identification, address verification and proof of income.

What to Do if You’re Denied a Loan

Not all applications get approved. Typically, lenders deny loan applications due to a low credit score or insufficient income.

The first thing you need to do is determine the reason your application was rejected. Call or email the lender. Check if modifying your application is possible to make it acceptable. For instance, you may get a more favorable result if you reduce the loan term or decrease the loan amount.

If necessary, you can apply for a loan with a different lender. But this isn’t ideal, especially if you haven’t improved the factor that led to the rejection of your application.

You should also be wary of loan offers with easy approval, such as payday loans. Although they help you get money easily, they often come with many disadvantages, like high interest rates or short repayment terms.

Calculate Your Monthly Payment

Personal loans are paid back in installments. Usually, lenders require you to make monthly payments. Before finalizing your decision, calculate your monthly payment first and see if you can fulfill this obligation.



+ $114.98


+ $8.33

Origination Fee Percentage


Origination Fee Fixed amount


Total monthly payment


Frequently Asked Questions About Personal Loans

The best personal loan depends on your needs, income and credit score. MoneyGeek answered the most commonly asked questions below to help you better understand how personal loans work.

How We Choose the Best Personal Loans

MoneyGeek carefully reviewed over 30 personal loan lenders and used at least 35 data points in six key categories: affordability, accessibility, consumer friendliness, customer service, flexibility, and transparency. These categories were evaluated based on factors such as APR ranges, available loan amounts, minimum credit scores, minimum income requirements, application fees, and disbursement times.

In addition to these technical details, we also took into account each lender's customer support, business ratings, and any additional features that could make the borrowing process easier for you, such as pre-qualification, payment options, and mobile apps. Our ultimate goal was to provide you with personal loan recommendations and expert tips that would help you make informed financial decisions and find a lender that meets your needs.

The content on this page is accurate as of the posting/last updated date; however, some of the rates mentioned may have changed. We recommend visiting the lender's website for the most up-to-date information available.

Editorial Disclosure: Opinions, reviews, analyses and recommendations are the author’s alone and have not been reviewed, endorsed or approved by any bank, lender or other entity. Learn more about our editorial policies and expert editorial team.