A personal loan lets you borrow a lump sum that you can use for a range of expenses, such as debt consolidation or home repairs. Personal loans are generally unsecured, meaning they don’t require collateral, and come with a fixed interest rate. You repay the money you borrow, plus interest over a set period.
How do personal loans work?
Personal loans are usually unsecured, which means they are not backed by collateral like a home or car. They‘re different from secured loans, such as mortgages or auto loans, which require collateral.
Personal loans are repaid in monthly installments. The amount you pay each month is determined by the loan terms. Your loan terms also include information about your interest rate and the total amount you'll need to repay.
While some personal loans can have a variable rate, meaning their interest rates can change over time, the interest rates on most loans are fixed, meaning they will not change over the life of the loan.
How do you get a personal loan?
Personal loans are available from a variety of sources, including banks, credit unions, and online lenders.
To get a personal loan, you'll first need to apply with a lender. This can be done online, over the phone or in person. After you fill out an application, the lender reviews your credit history and other financial factors to determine if you're eligible for a loan and, if so, how much they're willing to lend.
If you're approved, you'll receive a repayment schedule that outlines how much you'll need to pay each month, as well as the loan's interest rate and term.
Personal loans typically have terms of 1 to 5 years. You're responsible for making monthly payments until the loan and interest are paid in full.
