Learn more about personal loans
A personal loan is money borrowed from a bank, credit union or online lender that you pay back in fixed monthly installments, typically over two to five years, along with interest. The annual percentage rates on loans from mainstream lenders can range from 6% to 36%.
Most personal loans are unsecured, which means they aren’t backed by collateral. A secured loan backed by a car or house typically is cheaper, but you can lose the asset if you default on paying it back.
Unless you qualify for a 0% interest balance-transfer credit card, the rates on personal loans are typically cheaper than those on credit cards, and the amounts you can borrow are usually higher. If you have big balances on multiple high-interest credit cards, a personal loan can help you consolidate the debts into one payment at a lower rate.
Compare rates from multiple lenders before choosing. The loan with the lowest APR is the least expensive — and therefore, usually the best choice.
What rate should I expect?
Rates vary from lender to lender and depend heavily on your credit history and ability to repay, but here is what interest rates on personal loans look like, on average:
| How’s your credit? | Score range | Estimated APR |
|---|---|---|
| Source: lender survey | ||
| Excellent | 720 – 850 | 13.9% |
| Good | 690 – 719 | 18.0% |
| Average | 630 – 689 | 21.8% |
| Bad | 300 – 629 | 27.2%; lowest scores unlikely to qualify |
What are the requirements?
Almost all lenders require you to be 18 or older and a legal U.S. resident with a verifiable bank account, and not be in bankruptcy or foreclosure.
Borrowers with excellent credit and low debt-to-income ratios may qualify for interest rates at the low end of lenders’ ranges. Someone with poor or average credit may be able to get an unsecured personal loan on the strength of a steady income and low debt levels, but expect rates near the higher end of the range — up to 36%. Other options for borrowers with bad credit include secured or co-sign personal loans.
Some lenders say they don’t have minimum credit score requirements, but that doesn’t mean they don’t check your credit report. Knowing your credit profile before you apply can help set expectations. Several personal finance websites offer free access to your credit score and credit report. Look for a site that offers educational tools such as a credit score simulator or guidance on how to build credit.
If you can’t qualify for a loan through a reputable lender, don’t head to a payday lender just yet.