Personal Loans: Options, Rates, and How to Choose

What is a personal loan?

A personal loan is an installment loan that provides a lump sum of money, which you repay in fixed amounts over a set term. Most personal loans are unsecured, meaning they do not require collateral such as a car or home. Because they are unsecured, lenders rely heavily on your credit history and income when deciding whether to approve you and what interest rate to offer.

You can obtain a personal loan from banks, credit unions, and online lenders. The funds are typically deposited into your bank account, and you then make monthly payments until the loan is paid off. Personal loans generally have fixed interest rates, so your monthly payment stays the same for the life of the loan, making budgeting more predictable.

Sources: Experian

personal loans

Personal loans come in a few common forms, though the most basic distinction is between secured and unsecured loans. As noted, most personal loans are unsecured, but some lenders offer secured personal loans that require collateral, which can sometimes result in lower rates. Additionally, personal loans can be categorized by their purpose or repayment structure, such as debt consolidation loans or fixed-rate installment loans.

Another way to categorize personal loans is by lender type: banks, credit unions, and online lenders. Each may have different eligibility criteria, fees, and rate ranges. For example, credit unions often offer lower rates to their members, while online lenders may provide faster funding and more flexible terms.

• Unsecured personal loans: no collateral required, often higher rates
• Secured personal loans: backed by collateral, may have lower rates
• Fixed-rate loans: interest rate stays the same for the entire term
• Debt consolidation loans: used to combine multiple debts into one payment

Sources: Experian, Investopedia

Common uses of personal loans

Personal loans can be used for a variety of purposes, including debt consolidation, medical bills, home repairs, and other expenses. Because the funds are typically deposited into your bank account, you can use them for almost any legal purpose. Some lenders may ask what you plan to use the loan for, but they generally do not restrict how you spend the money.

Using a personal loan to consolidate higher-interest debt, such as credit card balances, is a common strategy because the personal loan's fixed rate and term can make repayment more manageable. However, it's important to compare the total cost of the loan—including fees—against the interest you might save.

• Debt consolidation
• Medical bills
• Home repairs and improvements
• Major purchases
• Emergency expenses

Sources: Broadview Federal Credit Union

Interest rates and fees

Personal loan APRs typically range from about 6% to 36%. The national average interest rate for a 36-month personal loan is 13.67%, according to Curinos data as of August 2026. Your individual rate will depend on your credit score, income, and other factors, and it may be higher or lower than the average. It's important to compare offers because rates can vary significantly from one lender to another.

Many personal loans have fixed interest rates, providing predictable monthly payments. However, you should also watch for fees. Origination fees on personal loans typically range from 1% to 10% of the loan amount. Other common fees may include late payment fees and prepayment penalties, though not all lenders charge them. Always read the fine print to understand the total cost of the loan, including the annual percentage rate (APR), which reflects both the interest rate and certain fees.

• APR range: approximately 6% to 36%
• National average for 36-month loan: 13.67% (as of August 2026)
• Origination fees: typically 1% to 10% of the loan amount
• Fixed rates provide predictable monthly payments

Sources: Experian, NerdWallet

Eligibility and credit requirements

When you apply for a personal loan, lenders evaluate several factors to determine your creditworthiness. The most important factors are your credit score, income, and debt-to-income ratio. Lenders often look for a credit score of 670 or higher to qualify for the best rates, but there are options for borrowers with lower scores, though they may face higher APRs or stricter terms.

A debt-to-income ratio of less than 36% is recommended to improve your chances of approval. This ratio compares your monthly debt payments to your gross monthly income. Lenders also consider your employment history and whether you have a bank account. In general, you must be at least 18 years old and have a regular income to qualify.

To check your rates without affecting your credit score, you can use prequalification, which typically uses a soft credit inquiry. This allows you to see potential loan offers before you formally apply.

• Credit score: 670 or higher often qualifies for best rates
• Debt-to-income ratio: less than 36% recommended
• Regular income and bank account typically required
• Prequalification uses a soft credit inquiry that does not affect your credit score

Sources: Investopedia, Credible, Experian

How to compare personal loan offers

Comparing personal loan offers is essential to finding the most affordable option. Start by gathering quotes from multiple lenders—banks, credit unions, and online lenders—and compare the following features: APR, loan amount, repayment term, origination fees, and any other charges. Because APRs can vary widely, even a small difference in rate can translate into significant savings over the life of the loan.

When you compare offers, look at the total cost of the loan, not just the monthly payment. A longer term may result in lower monthly payments but more interest paid over time. Also, consider any prepayment penalties if you think you might pay off the loan early. Prequalification can help you see potential rates without affecting your credit score, making it easier to shop around.

• Compare APRs, not just monthly payments
• Check origination fees and other charges
• Consider loan term: longer terms mean lower payments but more total interest
• Look for prepayment penalties
• Use prequalification to compare offers without a hard credit check

Sources: Experian, NerdWallet

Alternatives to personal loans

Depending on your situation, there may be alternatives to a personal loan that better suit your needs. For example, credit cards with 0% introductory APR offers can be a short-term financing option, but they often carry high interest rates after the promotional period expires. If you own a home, a home equity loan or line of credit might offer lower rates, but they use your home as collateral.

If you are borrowing for education, federal student loans often have lower interest rates than personal loans—typically 5% to 8%—and offer benefits such as income-driven repayment and loan forgiveness options. Personal loans generally have higher rates, often 8% to 15% or more, and do not offer such benefits. Weigh the pros and cons of each option based on your specific financial goals.

• Credit cards with 0% introductory APR (short-term)
• Home equity loans or lines of credit (secured by home)
• Federal student loans (for education expenses, often lower rates and more protections)
• Personal loans vs. student loans: compare rates and benefits

Sources: Experian, Broadview Federal Credit Union

Personal loans vs. student loans at a glance

When deciding between a personal loan and a student loan, it's helpful to see how they compare on key features. The table below summarizes common differences based on general lending practices. Keep in mind that specific rates and terms vary by lender and your individual credit profile.

Sources: Broadview Federal Credit Union