Personal Loans: Definition, Types & Rates

A personal loan allows you to borrow money from a lender for almost any purpose typically with a fixed term, a fixed interest rate, and a regular monthly payment schedule.

What are Personal Loans?

A personal loan is a flexible type of loan that you can use for just about anything at your discretion. They’re offered by both traditional institutions like banks as well as by online providers. Personal loans typically have fixed interest rates, fixed repayment terms, and set monthly payments. Unlike secured loans, like mortgages, personal loans don’t require you to put up collateral, so they’re a popular choice for those that need access to funds.

According to our data, more than half of Americans don’t have enough savings to cover a $1000 expense, so it’s no wonder that approximately the same percentage have taken out a personal loan at some point in their lives.

Average Personal Loan Rates

Your credit score largely determines the interest rate on a personal loan. Aside from your annual income, you should also consider the amount you need to borrow. When choosing a loan, it’s a good idea to compare rates from different lenders. Try lowering your loan amount if you’re not getting the rate you want. In the table below, you’ll find the average APR for each credit score based on stats from brands we’ve reviewed on Lendstart.

How to Get a Personal Loan:

To get a personal loan, you’ll need to follow these steps:

• Check your credit score and report to estimate how much APR you’ll need to pay.
• Compare personal loan options from multiple lenders.
• Review the terms and conditions offered by each lender, including interest rates and repayment periods.
• Choose a lender and complete the loan application, including providing information about your income and employment.
• Wait for loan approval and receive the funds, if approved.

Types of Personal Loans

As a borrower, your credit history, income, and debt-to-income ratio will determine your eligibility and interest rate for your personal loan. If you do decide to take out a personal loan, here some common uses of personal loans:

• Paying off debt
• Credit card refinancing
• Wedding
• Vacation
• Medical expenses
• Emergencies
• Home improvement
• Relocation

Should you Take a Personal Loan?

As always when making a financial decision, it’s important to consider your unique financial situation, life circumstances and expenses. If you decide that taking on a personal loan is right for you, shop around to get the best APR and loan terms.

Personal Loan Top Reviews