A personal loan is money you borrow from a lender to meet a specific financial need. They can be used for a wide range of purposes, including paying off debt, financing home renovations or covering emergency expenses. Unlike payday loans, personal loans are typically unsecured and don’t require you to put down collateral. However, it’s important to understand the different types of personal loans and their rates and fees before applying.
You’ll find personal loans offered by banks, credit unions and consumer finance companies. In addition, some online lenders specialize in personal loans. Generally, the best personal loan offers go to applicants with good or excellent credit scores, a solid history of on-time payments and consistent income. However, lenders also offer personal loans to borrowers with fair or bad credit (689 and below) at higher interest rates. If you have poor credit, it may be possible to get a personal loan with a co-signer who has good credit and agrees to repay the debt in case of default.
Once you’ve completed the application, it’s time to wait for approval. This can take anywhere from a few hours to several days, depending on the lender and its policies. Upon approval, your lender will usually deposit the funds into your bank account. You can then use the funds for your intended purpose and begin repayment immediately. During the term of your loan, your lender will likely report your payment history to one or more of the major credit reporting agencies.