What is a personal loan?
A personal loan is money you borrow in a lump sum and repay in fixed monthly payments. This type of loan is usually unsecured, meaning you don’t have to put up property like a house or car as collateral for the loan. You can get a personal loan from a bank, credit union or online lender. Personal loan amounts are from $1,000 to $100,000, and they’re typically repaid over a term of two to seven years. To qualify you, lenders look at factors including your credit score, credit report and debt-to-income ratio.
What are personal loan rates?
Personal loan rates typically range from about 6% to 35.99%, though current rates are trending higher.
Lenders primarily use your financial and credit information to determine your rate, but may consider additional information like whether you own your home, your education level and your employer. Consumer advocates say 36% is the highest annual percentage rate a loan can have and still be considered affordable.
Borrowers with good to excellent credit scores (690 and higher) typically get the lowest interest rates and can borrow larger amounts. They also have the most options when it comes to shopping for a loan.
Those with fair to bad credit (scores below 690) may have to look a little harder and pay a higher rate for a personal loan. Having steady income, low debt, a long credit history and a record of on-time payments will improve your chances of being approved.
» MORE: See your bad-credit loan options
Current average personal loan rates
Here’s what annual percentage rates on personal loans look like, on average:
Borrower credit rating | Score range | Estimated APR |
Excellent | 720-850. | 13.40%. |
Good | 690-719. | 15.86%. |
Fair | 630-689. | 18.93%. |
Bad | 300-629. | 21.14%. |
Source: Average rates are based on aggregate, anonymized offer data from users who pre-qualified in NerdWallet’s lender marketplace from Jan. 1, 2024, through Jan. 31, 2024. Rates are estimates only and not specific to any lender. The lowest credit scores — usually below 500 — are unlikely to qualify. Information in this table applies only to lenders with maximum APRs below 36%.
» COMPARE: Best personal loan interest rates
Personal loan uses
One benefit of getting a personal loan is you can use the money for nearly any purpose. Ideally, getting one positively impacts your overall financial health, by helping you pay off debt faster, for example, or adding to the value of your home. Here are some top reasons consumers get personal loans:
Debt consolidation: Roll your debts into one monthly payment, potentially reducing the interest you pay toward the debt and helping you pay it off faster.
Home improvement: Need to add on a home office or install a swimming pool? Use a personal loan to cover the costs.
Large expenses: You can use a personal loan to buy a boat, RV or other items with large price tags.
Weddings: Using a personal loan to pay for your wedding can help you stick to a budget.
Emergencies: Because personal loans are funded quickly, they can help cover an urgent home or car repair. Compare any loan with interest-free options.
» MORE: What are personal loans used for?
How to compare personal loans
If you decide a personal loan is right for you, compare rates from multiple lenders. The loan with the lowest APR is the least expensive — and usually the best choice. Here are the most important features to compare on personal loans.
APR: A loan’s annual percentage rate represents the interest rate plus any fees the lender charges. When comparing offers, APR tells you which is the least expensive overall. It also provides an apples-to-apples comparison across financial products, so you can compare the cost of a personal loan to a credit card, for example.
Monthly payment: Even if a loan has a low APR, you need room in your budget to repay it each month. Your monthly payment is determined by the loan amount, interest rate and repayment term. A shorter term may mean higher monthly payments, but you’ll pay less in interest over the life of the loan. Use a personal loan calculator to see how the rate and repayment term affect the monthly payment.
Fees: The most common fees on a personal loan are late and origination fees. An origination fee is often 1% to 10% of your loan amount, and lenders typically deduct the fee before sending you the funds. If your lender charges this fee, make sure the final loan amount will be enough to cover your expenses.
Funding time: Many lenders can fund a loan the day after approval, but some take up to a week to send you the money. If you need cash fast, compare fast personal loans to find a lender that offers same- or next-day funding.
Payment flexibility: Some lenders let you choose your initial payment date and allow multiple changes during repayment, while others require you to pay on the same date each month for the life of the loan. Since you could be repaying this loan for years, consider whether you’ll want the option to change your due date, skip a payment or pause payments during a hardship.
Other consumer-friendly features: If you have a couple of competitive offers, consider other common personal loan features to break the tie. Some lenders offer rate discounts, no fees, extra long repayment terms on home improvement loans or direct fund transfers to other creditors on debt consolidation loans.
» MORE: NerdWallet's picks for best personal loans
Before you get a personal loan
Check your credit score. Learn about your personal loan options based on your credit score. This will give you an idea of what rate and payment to expect as you shop for loans. You might decide to postpone getting a loan and instead take steps to build your credit in order to get a lower rate or a larger loan.
Compare your options. Interest rates on personal loans for excellent credit start around 6% APR, but if you can qualify for a 0% interest credit card — and pay off the balance within the promotional period — then you may be better off with the credit card. Here's how to compare personal loans and credit cards.
Find a co-applicant. If you have bad credit, having a co-signer with good credit allows you to piggyback on his or her creditworthiness and potentially get a better rate. With a joint or co-signed personal loan, your co-applicant has to make payments if you fail to.
Consider a secured personal loan. Using a car, savings account or other asset as collateral may get you a lower rate. The risk is losing your asset if you default on the loan.
Assess your overall financial well-being. Personal loans work best as part of a balanced financial plan. Borrow money to consolidate debt if it means you’ll get out of debt more quickly. But don’t borrow if it only adds financial strain. If your current debt is overwhelming, investigate your debt-relief options.
» MORE: What are the requirements for a personal loan?
How to get a personal loan
Review your credit report. Check your credit report to see what a lender will see and take steps to fix any errors or past-due accounts. You can get your free credit report with NerdWallet or at AnnualCreditReport.com.
Calculate your payments. Review your budget to see how much room you have for monthly loan payments. Then, use a personal loan calculator to see what loan amount, rate and repayment term will get you affordable monthly payments.
Pre-qualify and compare offers. Most online lenders allow you to pre-qualify without affecting your credit score. Check your rate with multiple lenders to find the best offer. If you have good credit and an existing banking relationship, take a pre-qualified loan offer to your bank and ask if they’ll beat it. Once you have multiple loan offers in hand, compare the loan features and fine print, including total costs and any penalties.
Gather documents. Most personal loan applications require proof of income, which can be a W-2, pay stubs or bank statements. You’ll also need a government-issued ID such as a driver’s license or passport and your Social Security number. Gather these documents before you apply to speed up the process.
Apply. The final step is to submit your personal loan application. Applying involves a hard credit check that can temporarily lower your credit score. Depending on the lender, you should receive your funds within a few days.
» MORE: How long does it take to get a personal loan?
How to manage a personal loan
Even before you receive your loan, make a plan to pay it off, ensuring you can manage on-time monthly payments for the life of the loan — whether that's two or seven years. Missing even one loan payment can hurt your credit score, and defaulting on the loan can mean late fees and collections calls.
If you face a financial setback while paying off your loan, reach out to your lender and ask about a hardship option. Some lenders may allow you to defer loan payments for a specified time.
Online personal loan companies reviewed by NerdWallet
Best lenders for excellent-credit borrowers
Lender | Best for | Min. credit score | Repayment terms | Pre-qualification | Time to fund after approval |
|---|---|---|---|---|---|
Discover | Flexible payment options. | 660. | 3 to 7 years. | Yes. | Next day. |
LightStream | Fast approval and funding. | 660. | 2 to 7 years; up to 12 years for larger home improvement loans. | No. | Same or next day. |
SoFi | Free financial advising. | None. | 2 to 7 years. | Yes. | Same day. |
Best lenders for good-credit borrowers
Lender | Best for | Min. credit score | Repayment terms | Pre-qualification | Time to fund after approval |
|---|---|---|---|---|---|
Achieve | Joint loans. | 620. | 2 to 5 years. | Yes. | 1 to 3 days. |
LendingClub | Credit-building features. | 600. | 2 to 5 years. | Yes. | Next day. |
Happy Money | Credit card consolidation. | 640. | 2 to 5 years. | Yes. | 1 to 3 days. |
Prosper | Flexible payment options. | 560. | 2 to 5 years. | Yes. | 1 to 3 days. |
Rocket Loans | Fast approval and funding. | 640. | 3 or 5 years. | Yes. | Same or next day. |
LendingPoint | Fast application and approval. | 660. | 2 to 5 years. | Yes. | Same or next day. |
Best Egg | Secured loans. | 600. | 3 to 5 years. | Yes. | 1 to 3 days. |
Best lenders for fair- and bad-credit borrowers
Lender | Best for | Min. credit score | Repayment terms | Pre-qualification | Time to fund after approval |
|---|---|---|---|---|---|
OneMain | Secured loans. | None. | 2 to 5 years. | Yes. | 1 to 2 days. |
Universal Credit | Credit-building tools. | 560. | 3 or 5 years. | Yes. | Next day. |
Upgrade | Debt consolidation. | 560. | 3 to 5 years; 7 years on larger home improvement loans. | Yes. | Next day. |
Upstart | AI-powered underwriting. | None. | 3 or 5 years. | Yes. | Next day. |
Avant | Fast funding. | 550. | 1 to 5 years. | Yes. | Next day. |
See more personal loan options on NerdWallet
Debt consolidation loans
Installment loans
Bad credit loans
Small personal loans
Personal loans rating methodology
NerdWallet writers and editors conduct an annual comprehensive fact check and update of our lender reviews, but also make updates throughout the year as necessary.
Our star ratings award points to lenders that offer consumer-friendly features, including: soft credit checks to pre-qualify, competitive interest rates and no fees, transparency of rates and terms, flexible payment options, fast funding times, accessible customer service, reporting of payments to credit bureaus and financial education. We also consider regulatory actions filed by agencies like the Consumer Financial Protection Bureau. We weigh these factors based on our assessment of which are the most important to consumers and how meaningfully they impact consumers’ experiences.
This methodology applies only to lenders that cap interest rates at 36%, the maximum rate most financial experts and consumer advocates agree is the acceptable limit for a loan to be affordable.
