How Personal Loans Work

Personal loans are a type of installment loan that allow borrowers to receive a lump sum of money and repay it over a fixed period of time with interest.

What Is a Personal Loan?

A personal loan is typically unsecured, meaning it does not require collateral. Borrowers receive a fixed amount and repay it in equal monthly payments.

How Interest and APR Work

Interest represents the cost of borrowing money, while APR includes interest plus any additional fees charged by the lender.

Typical Personal Loan Terms

• Loan amounts: $1,000 – $50,000
• Repayment terms: 2–7 years
• Interest rates: Vary based on credit score

Should You Use a Personal Loan?

Personal loans can be useful for debt consolidation, large purchases, or unexpected expenses, but borrowers should compare offers carefully.