Ultimate Guide to Personal Loans

Personal loans have become one of the most popular financial tools for consumers in the US to access money in 2023. If you need quick cash and don’t want to max out a credit card or pull equity from your home, what should you do? Another option is a personal loan. A personal loan is an unsecured loan that you can receive at various interest rates, depending on your credit. Learn all about personal loans in our ultimate guide, then speak to a loan adviser about your options.

Personal Loan Guide

A personal loan is an unsecured loan from a credit union, bank, or online lender that is paid monthly for a relatively short term, usually between two and seven years. Personal loans usually do not have collateral, so the rate is often higher than for secured loans, such as a home equity line of credit.

How Personal Loans Work

If you’re approved for a personal loan, the lender will typically deposit the money in your account within a few days, minus any fees they charge. Once you have the cash, it can be used for most purposes, including paying off credit cards, paying for college, doing home renovations, and more.
Loan repayment usually starts within 30 days of receiving the money. You can pay fixed installments from your bank account and lenders may give you a slight discount if you set up auto draft from your account. Monthly payments continue until you paid it in full.

When Is a Good Time to Get a Personal Loan?

One estimate says that about ¼ of Americans have taken out a personal loan in the last year for an average amount of $5,000. You may want to get a personal loan in these situations:

  • The rate is lower than you can get on a credit card or other kinds of financing.
  • You are using the money for something that will improve your finances, such as home improvements or debt consolidation.
  • You don’t want to risk a secured loan, which would put your collateral on the line.
  • You can deal with the monthly payments without financial stress.

Why Do People Get Personal Loans?

Personal loans are used for many things, including loan consolidation, major life events, home renovations, medical bills, college expenses, and various unexpected expenses. The interest rate is higher than for secured loans, so be sure that you will use the money for something that will benefit your life financially.

What Are Personal Loan Rates And Fees?
Personal loan rates vary widely by lender and your credit score is a big part of the interest rate. In 2024, interest rates are higher than two years ago, and with a credit score of 720 or higher, you may get a rate between 12% and 14%. If you have fair or poor credit, an interest rate between 22% and 30% is likely. Whether it makes sense to borrow money with that high of a rate depends on your needs and situation.

personal loan


Pros and Cons of Getting a Personal Loan

Like any financial instrument, there are advantages and disadvantages to getting a personal loan:


  • No collateral, so you don’t lose your property if you don’t pay.
  • Flexible amounts: You may be able to get a loan for as little as $1,000 and up to $50,000 or more.
  • Fixed rates and payments. When you are approved for a personal loan, you know exactly what you will pay and for how long. These aspects of the loan make financial planning easier.
  • Lower APRs than many credit cards: If you have a credit score over 650, you may be able to get a lower rate than a credit card.


  • APR can be high with poor credit. Personal loans may not be for you if you have a credit score below 640 or so; the interest rate and fees could reduce the financial benefits of taking out the loan.
  • Potential fees: Most lenders charge hefty origination fees up front.
  • More debt: Taking out a personal loan increases your debt, unless you use it to pay off credit cards.

What Is the Best Place to Get a Personal Loan?

You can obtain a personal loan from many sources, including banks, credit unions, and many online lenders. If you want a fast, easy loan application, an online source makes sense. But if you want personal service and have a relationship with a local bank or credit union, staying local could be a good choice. Applying in person with your bank could take longer, however.

Tips to Select the Best Personal Loan

Here are some tips to help you get the best personal loan for your needs:

  • Soft credit check: Some lenders will do a soft credit check to find out what your rate and terms will likely be. This is helpful for shopping because a hard credit check lowers your score. Pre-qualify with a few lenders with soft credit checks to find out the terms you can get.
  • Look at APRs: Don’t focus only on the interest rate; APR includes all fees, so it gives you a better idea of what the money will really cost you. A loan with a lower rate could end up costing you more if the fees are higher.
  • Terms: Look for a loan with a shorter payment term, if you can afford it. This will mean you pay less interest for the money.
  • Amount of loan: One lender could be better than the other depending on the amount you need. Some lenders may be best for small loans under $10,000, while others could be superior for loans up to $50,000.

How Personal Loan Interest Rates Are Determined

Most personal loans have fixed rates, but you may see some loans that have variable rates based on the prime rate. Many borrowers prefer a fixed rate so they know how much they are paying. However, if you choose a variable rate, find out what the cap is so you never pay above that amount.

What Do You Need to Qualify for Personal Loans?

Most consumers know that interest rates have risen significantly in the last two years. It isn’t unusual to pay more than 20% interest on a credit card. This is why so many people are turning to personal loans to try to get a better deal. For many consumers, a personal loan offers better rates and terms than credit cards. But how do you qualify for a personal loan? Keep reading to learn about personal loan qualifications and talk to your lender if you have questions or want to apply.

Personal Loan Qualifications

Most personal loan lenders have similar requirements for their loans, but the qualification standards may vary. The basic requirements for getting a personal loan are:

  • Credit history
  • Credit score
  • Debt-to-income (DTI) ratio
  • Collateral, if applicable
  • Origination fee

Credit Score

Your credit score is the most important factor for getting approved and scoring a low rate. Most lenders want to see at least a 600-credit score, but you will have a high rate with a score that low. The best rates under 10% are for those with credit scores of at least 720. Many consumers do not realize that there are very few no credit check personal loan options.


The personal loan lender will have income requirements to ensure you have the means to pay the loan back. The minimum salary requirements vary; some lenders expect at least a $45,000 per year income, but others may only require $20,000. But do not be surprised if the lender does not tell you what their minimum income standard is.

Some lenders may want to see bank statements, tax returns, and pay stubs for proof of income.


DTI is a percentage and represents how much of your gross income is used to service debt. Lenders look at DTI to understand your ability to make your payments on new and current debt. Many lenders want a DTI of 36% or less, but some lenders will approve you if highly qualified with a 50% DTI.


If you are asking for a secured personal loan, your lender will want you to provide collateral for the loan. Many personal loans are unsecured, but if you get a secured loan, the collateral could be a home, car, cash, investment accounts, or collectibles. If you cannot make your payments, the lender will take the collateral.

Origination Fee

Many personal loans require you to pay an origination fee when you apply for the loan. The origination fee pays for processing your application, running a credit check, and closing the loan. Many lenders charge the fee when the loan is closed, but some may roll the fee into the loan payment or subtract it from the money you receive.


A helpful way to get started with the personal loan process is to pre-qualify online for the loan. Many lenders let you do a prequalification application online so you can see the rate and terms you may qualify for, without affecting your credit score. When you submit a full application, they will do a hard credit check, which will lower your score by a few points. Prequalifying is a useful way to look at several lenders’ terms without affecting your score. Learn how to qualify for debt consolidation.

With more budgets stretched thin as inflation has taken a toll in the US, many people are turning to personal loans to get the money they need. When you have decent or good credit, a personal loan can be an excellent deal because the rate could be well below that of typical credit cards. Talk to your lender today about your personal loan options and you could be just days away from getting the money you need.

How to Compare Personal Loans

With the average credit card rate at 20%, more Americans are turning to other means to get the money they need. One way is a personal loan, which is another type of unsecured loan that may come with a lower rate. Terms vary, but in many cases you can borrow between $1,000 and $50,000 for as long as five or seven years, with rates between 5% and 36%. Learn in this article about how to compare personal loans. If you have questions or want to apply, talk to a loan advisor who can offer you a variety of personal loan options.

Interest Rates

The first thing most applicants are interested in is the interest rate. Personal loans have an average rate of 11% in 2023, which is well below the rate for credit cards. But rates vary based on your credit. If you have a high credit score, you probably can get a rate well below 10%, which is quite a deal for an unsecured loan. Expect to need a 720 or higher score to get the best interest rate.

Approval Requirements

Every personal loan lender has its own approval standards. Most personal loan lenders will look at your credit score, income and job history to make a lending decision. Check the eligibility criteria for every lender to understand which is best for you. You also can tell your loan advisor what your income and credit score is and they can tell you which program may be best for you.

Personal Loan Fees

When considering interest rates, make sure you review the fees, too. There could be origination fees, application fees, and even prepayment penalties. One loan could have a lower rate and higher fees, making it not as good a deal as you might think.


If you do not have perfect credit, you will pay more in interest. Look for a lender that will allow you to apply with a co-signer. This will increase your chances of approval as well as the interest rate.

If you use a co-signer still gives you a high rate, it is best to focus on raising your score. Pay off debt and make payments on time  for several months and your credit score will rise.

Loan Amounts

Lenders typically offer personal loans in amounts from $1,000 to $50,000, but there are some loans that can be had for $100,000. For most of us, this range should cover most needs. Larger personal loans are intended for people with higher incomes and credit scores and the minimum is usually about $5,000.

You should check each lender’s cutoff because some may limit you to only about $20,000. This could be more than you need, but it should be considered, especially if the lender has a high origination fee.

Repayment Periods

How long you have to pay back the loan has a major impact on how much the lender earns in interest. A two-year loan may have higher payments, but it will help you save hundreds or thousands in interest. If you get a longer loan, your payment will be lower but the interest you pay will be considerable. The best choice is to opt for a shorter, higher payment so you can pay as little as possible in interest.

Choosing a Personal Loan Program

After you have narrowed down your choices to a few lenders that offer loans in your credit score and income range, apply with prequalification with each lender. You should be able to see your rate and term without affecting your credit score. When you see the one you want, complete the full application and hopefully, you will be approved. Some lenders will approve you the same day and fund the loan within a few days.

With this information, you should have a good idea of the kind of personal loan you want. Talk to your loan provider today about personal loans and soon you will have the money you need.


Getting a personal loan may be an effective tool in your financial future. If you do your research and understand your credit history and needs, a personal loan can be used to get you the money you need with lower risk and costs. Talk to your loan adviser today about whether a personal loan is right for you.


ELIGIBILITY and ADDITIONAL DETAILS; PERSONAL LOAN INTEREST RATES and FEES. You can see personal loan offers on the Smart Lending personal loan marketplace from third party advertisers from which Smart Lending receives compensation. These personal loan offers displayed have rates that range from 5.4% APR to 30.99% APR with terms from 12 months to 15 years. Personal loan rates are subject to change without notice and are controlled by our third-party advertisers, not Smart Lending. Depending on the personal loan lender, other fees may apply, such as origination fees or late payment fees. See the specific lender’s terms and conditions for additional details. All loan offers on Smart Lending require your application and approval by the lender. You may not qualify for a personal loan at all or you may not qualify for the best available rates or the highest loan amounts.

PERSONAL LOAN REPAYMENT EXAMPLE. The following example assumes a $15,000 personal loan with a four-year (48 month) term. For APRs ranging from 5.4% to 35.99%, monthly payments would range from $349 to $594. This example assumes that all of the 48 payments are paid on-time, the total amount paid would range from $16,712 to $28,492.