Personal loans may be seen as a last resort for covering large expenses or consolidating debt, but they can actually be a helpful financial tool.
They offer lower interest rates than credit cards and often don't require collateral, making them a safer and more affordable option for financing.
There are many kinds of personal loans, however, and picking the right one for your needs is critical.
How personal loans work
A personal loan is a type of installment loan that provides a lump sum of money upfront and is typically offered by banks, credit unions or online lenders like SoFi and Upgrade.
Once the funds are disbursed, the borrower begins making regular monthly payments that include a portion of the principal plus interest.
Personal loans can be used for any variety of purposes, from paying medical bills and consolidating debt to financing a wedding or buying a new car. Platforms like LendingTree and Credible let you compare personal loan offers from multiple lenders without affecting your credit score.
Credible® Student Loans
Eligible borrowers
Undergraduate and graduate students, parents
Loan amounts
Amount varies by individual lender
Loan terms
Range from 5 to 20 years
Loan types
Variable and fixed
Borrower protections
Amount varies by individual lender
Co-signer required?
Varies by individual lender
Offer student loan refinancing?
Yes - click here for details
Terms apply.
Pros
- Lets you compare offers from multiple lenders
- None of the lenders on Credible charge origination fees or prepayment penalties
- Can check prequalified rates with lenders for free without a hard credit check
Cons
- Doesn't directly underwrite loans, so you'll have to do some comparison shopping
Not all loans are created equal, though. Some require collateral, while others are unsecured. Some have fixed interest rates, while others are variable.
Understanding the differences can help you choose the one that best fits your financial needs and protects you from unexpected risks.
Unsecured personal loans
An unsecured loan doesn't require collateral, which means you won't risk losing an asset, like your car or house, if you default. Student loans, medical loans and debt consolidation loans are all types of unsecured personal loans.
Lenders look at your credit, income and financial history to decide whether to approve you for an unsecured loan. The higher your credit score, the better your chances are of being approved for the best rates.
They may also review your employment history and education, especially if your credit history is thin.
LightStream offers low-interest unsecured personal loans with flexible terms for people with good to excellent credit.
We like that LightStream offers competitive APRs, no late or origination fees and long loan term options. But you can't prequalify and the loan minimum may be too high if you only need to borrow a small amount.
- Same-day funding available.
- Loan amounts up to $100,000.
- No origination fee or late fee.
- The minimum loan amount is $5,000.
- Prequalification not available.
- No option to pay your creditors directly.
An unsecured loan isn't without risks. Defaulting on payments can seriously hurt your credit score for years. Your lender may tack on late fees and refer your debt to a collection agency, and they can also sue you to recover the balance. If they win, your wages can be garnished or a court order may allow them to withdraw funds directly from your bank account.
Who's this for? An unsecured loan is best for borrowers with good credit who want to finance a large expense, like a wedding or home repairs, without risking assets.
Secured personal loan
A secured loan, on the other hand, is backed by collateral. That means if you fail to make payments, you agree to hand over an asset, like your car or house. Because there's less risk to the lender, secured loans often come with lower interest rates and easier approval requirements.
We like that OneMain accepts borrowers with bad credit and offers secured loans and fast funding. However, its minimum APR is on the high side and the $30,000 financing maximum may be too low if you need a larger loan.
- Approves applicants with bad/fair credit
- Same-day funding available
- Can apply with collateral
- Co-applicants allowed
- High origination fee
- High minimum interest rate
- No autopay discount
- Co-signers not allowed
*You must complete a loan application and continue to meet any criteria used to select you for a loan offer. Not all applicants are approved. Loan approval and actual loan terms depend on applicant's state of residence and ability to meet OneMain Financial credit standards such as a responsible credit history, sufficient income after monthly expenses, and if applicable, availability of eligible collateral.
Not all approved applicants qualify for larger loan amounts, lower APRs, or the most favorable loan terms. For example, larger loan amounts typically require a first lien on a motor vehicle that is no more than ten years old, meets our value requirements, and is titled in applicant's name with valid insurance. APRs are generally higher on loans not secured by a vehicle.
Example Loan: A $6,000 loan with a 24.99% APR that is repayable in 60 monthly installments would have monthly payments of $176.07.
OneMain charges origination fees allowed by law. Depending on the state where the loan is opened, the origination fee may be either a flat amount or a percentage of the loan amount. Flat fees vary by state, ranging from $25 to $500. Percentage-based fees vary by state, ranging from 1% to 10% of the loan amount subject to certain state limits on the fee amount.
For information about these fees and minimum and maximum loan sizes available in certain states, visit omf.com/loanfees.
Current OneMain Customers: Loan offers presented to a consumer assume the individual has no active loan with OneMain or one of its affiliates. If a customer applies for a new loan offer, a OneMain representative will discuss available options.
Active-duty military, their spouse or dependents covered by the Military Lending Act (MLA) may not pledge any vehicle as collateral. If you are covered by the MLA, you are not eligible for secured loans.Loan proceeds cannot be used for postsecondary educational expenses as defined by the CFPB's Regulation Z such as college, university or vocational expense; for any business or commercial purpose; to purchase cryptocurrency assets, securities, derivatives or other speculative investments; or for gambling or illegal purposes.
Time to Fund Loans: Funding within one hour after loan closing through SpeedFunds® must be disbursed to a bank-issued debit card. Disbursement by check or ACH may take up to 1-2 business days after closing.
OneMain Financial Personal Loans approves applicants with bad or fair credit by securing their loans with collateral.
Who's this for? Secured loans are best if you have a low credit score or want a better rate and are comfortable putting something valuable on the line.
Fixed and variable-rate personal loans
Bank loans come with an interest rate that's either fixed or variable. A fixed rate stays the same throughout the life of the loan, meaning predictable monthly payments that are easier to budget around.
Variable-rate loans start with a certain interest rate, but can fluctuate based on market conditions. They usually start lower than fixed rates and, if market rates decrease, you'll save even more in interest.
But there's always the risk that market rates will rise, making your interest rate and monthly payment increase.
Fintech company SoFi lets you choose between a fixed or variable rate.
We like that SoFi has high loan caps and doesn't charge any origination fee, so borrowers get the full amount funded. The credit requirements can be stringent, however, and interest rates for weaker applicants are on the higher side.
- Loans approved for up to $100,000
- No origination fee or late fee
- Next-day funding available
- Accepts co-borrowers
- Minimum loan amount is $5,000
- High APR for fair/low credit
Fixed rates from 8.74% APR to 35.49% APR. APR reflect the 0.25% autopay interest rate discount and a 0.25% SoFi Plus interest rate discount. SoFi Platform personal loans are made either by SoFi Bank, N.A. or, Cross River Bank, a New Jersey State Chartered Commercial Bank, operating from its Delaware branch, Member FDIC, Equal Housing Lender. SoFi may receive compensation if you take out a loan originated by Cross River Bank. These rate ranges are current as of 02/23/26 and are subject to change without notice. Not all rates and amounts available in all states. See SoFi Personal Loan eligibility details at https://www.sofi.com/eligibility-criteria/#eligibility-personal. Not all applicants qualify for the lowest rate. Lowest rates reserved for the most creditworthy borrowers. Your actual rate will be within the range of rates listed above and will depend on a variety of factors, including evaluation of your credit worthiness, income, and other factors.
Co-signed personal loans
With a co-signed loan, a second party (often a parent, spouse or friend) applies for the loan, as well, in most cases because the primary applicant has bad credit or a thin credit file. More than 90% of private student loans are co-signed, for example.
A co-signer can greatly improve your chances of getting approved or receiving a better rate. The co-signer does not have access to the loan funds but legally shares responsibility for the debt and is responsible for repayment if the primary borrower falls behind or defaults.
With student loans, lenders often allow co-signers to be released from their obligation after a certain number of on-time payments. Education lender Edly only requires borrowers to make six consecutive monthly payments before allowing a co-signer to be released, the shortest term we've found.
Edly Student Loans
Eligible borrowers
Qualifying juniors, seniors and graduate students
Loan amounts
$2,000 up to $15,000 per academic year and up to $10,000 for summer terms; ($20,000 lifetime limit)
Loan terms
84 months
Loan types
Variable
Borrower protections
Deferment and forbearance; all loans are based on income-based repayment
Co-signer required?
No
Terms apply.
Pros
- Considers borrowers' schooling and programs
- All loan payments are income-based
- Hardship protections available
- No co-signer required
- Student success team and career counselors available for support
Cons
- Only 7-year loan terms
- Only variable-rate loans
- Not available in every state
- Non-cosigned loans tend to charge higher interest rates
Joint personal loans
A joint loan is a loan shared between two people who apply together. Like a co-signed loan, lenders evaluate both applicants' incomes and credit histories, but both parties have access to the funds.
Prosper allows borrowers to submit a joint application and issues loans from $2,000 up to $50,000, with repayment terms of up to 60 months.
You can sign with collateral or a co-borrower to better your approval odds and secure a lower rate. Funding can be quick.
- Approves loans of up to $50,000
- Repeat borrowers may qualify for an APR discount
- Borrowers can choose their payment date
- Co-borrowers permitted
- Higher maximum APR than other lenders
- Funding may take several days
- No direct payment to creditors
- Numerous fees
Debt consolidation loans
A debt consolidation loan combines multiple debts — like credit cards, medical bills and payday loans — into one single monthly payment. Not only are you able to get a lower interest rate, but you only have one payment to keep track of.
Keep in mind that consolidating doesn't eliminate your debt. It just restructures it.
We like that Upgrade considers borrowers with fair credit and allows you to apply with a co-borrower, which can improve your odds of approval and receiving favorable rates. The maximum interest rate is on the high side, however.
- Accepts applicants with fair credit
- Approves loans of up to $75,000
- Discount for having creditors paid directly
- Funding in as little as one day
- Accepts co-borrowers
- High maximum interest rate
- Origination fee of up to 9.99%
- No physical branches
Why Upgrade is the best for financial literacy:
- Free credit score simulator to help you visualize how different scenarios and actions may impact your credit
- Charts that track your trends and credit health over time, helping you understand how certain financial choices affect your credit score
- Ability to sign up for free credit monitoring and weekly VantageScore updates
Upgrade offers debt consolidation loans for up to $75,000, making it a solid choice if you have large debts. Funds can be available the next business day or you can choose to have Upgrade send payment directly to your creditors.
Who's this for? Debt consolidation loans are best if you have multiple high-interest debts, like credit card bills, and want a lower rate and a more simplified payment structure.
Personal lines of credit
A personal line of credit is a flexible loan that works like a credit card and is best suited for borrowers who need access to cash over time, rather than in a lump sum.
You're approved for a certain credit limit and can draw from it as needed, paying interest only on the amount you use. It's a revolving form of credit, meaning you can reuse the funds as you repay them.
U.S. Bank Personal Line of Credit
Annual Percentage Rate (APR)
11.50% to 21.50%
Loan purpose
Unsecured revolving line of credit for ongoing needs, like home repairs
Loan amounts
Up to $25,000
Minimum credit score
680
Origination fee
None
Cash advance fee
4% of each advance amount, $10 minimum
Late fee
Up to $40
Terms apply.
Pros
- Competitive interest rates
- No origination fee or annual fee
- No collateral required
Cons
- Late fee of up to $40
- No interest-free grace period
Personal lines of credit often require strong credit and steady income. U.S. Bank approves applicants with a 680 FICO Score for lines of credit up to $25,000, with no application fee or annual fee.
Buy now, pay later
A buy now, pay later (BNPL) loan is short-term financing usually offered at checkout that lets you split your payment into smaller installments, often with no interest if paid on time.
Klarna
Credit limit
Initial limit of $100; may be increased up to $2,500.
Loan terms
Four interest-free payments every two weeks or a one-time payment within thirty days
Monthly payment plan?
Yes, users can pay over 6 to 24 months.
Fees
Late fee of up to $7 (after 10 days)
Available merchants
Accepted at nearly 800,000 merchants, including Amazon, Best Buy, Walmart and Target. Through the Klarna card, you can buy from retailers not integrated with the company.
Pros
- Accepted at nearly 800,000 merchants, including Amazon, Best Buy, Walmart and Target
- Splits purchases into four interest-free payments
- Pay-over-time plans available up to 24 months for larger purchases
Cons
- Late fees apply, though capped at $7
- Monthly installment plans may charge interest
- No option to reschedule payments once scheduled
- Credit limit starts at $100
BNPL can be helpful for financing small-to-midsize purchases, but it can also lead to overspending. Missing a payment could also trigger fees and hurt your credit score.
Klarna and Afterpay are among the leaders in the BNPL space, accepted by thousands of stores.
Cash App Afterpay
Interest rate
0% on purchases under $400. Up to 35.99% on purchases over $400.
Credit limit
$35 to $2,500 per transaction.
Loan terms
Four installments over six weeks.
Monthly payment plan?
Yes, Pay Monthly plan is available for purchases from $100 to $10,000, with payments across 3, 6 to 12 or 24 months. APR ranges from 0% to 35.99%.
Fees
One-time late fee of up to 25% on purchases under $40. For purchases of $40 or more, an initial $10 late fee and $7 for every 7 days, up to $68 or 25% of the purchase price, whichever is less.
Available merchants
Afterpay is accepted at over 15,000 merchants nationwide, including Sephora, Ulta Beauty, Target and Best Buy.
Pros
- No interest on purchases under $400
- Accepted at over 15,000 merchants, including Sephora, Ulta Beauty, Target and Best Buy
- Available online and in stores
Cons
- Late fees can add up fast (up to $68 on larger purchases)
- Pay Monthly plan not available in Hawaii, New Mexico, Nevada or West Virginia
Personal loans FAQs
How long does it take to get a personal loan?
A personal loan can be funded as quickly as the same day, especially with an online lender. Brick-and-mortar banks and credit unions may take about a week or more.
How can I get a personal loan with bad credit?
With bad credit, you can improve your chances by applying with a co-signer, choosing a secured loan or going through a credit union or a lender that specializes in borrowers with weak credit.
Can you refinance a personal loan?
Yes, you can refinance a personal loan with a new one with better rates or terms. You might look into refinancing if your credit has improved and you think you could secure a better rate. Refinancing to a longer term can lower your monthly payments, although you may pay more interest over the long term. Keep in mind that a new loan will likely come with new fees and cause a temporary dip in your credit score.
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