What Is a Personal Loan?

A personal loan is a type of installment loan that allows you to borrow a fixed amount of money and repay it over time with interest. Personal loans are commonly used for debt consolidation, large purchases, or unexpected expenses.

How Personal Loans Work

When you take out a personal loan, you receive a lump sum of money upfront. You then repay the loan in fixed monthly payments over a set term, usually between two and seven years.

Secured vs Unsecured Personal Loans

Most personal loans are unsecured, meaning they do not require collateral. Some lenders offer secured personal loans, which are backed by an asset such as a savings account or vehicle.

Common Uses for Personal Loans

• Debt consolidation
• Home improvements
• Medical expenses
• Major purchases
• Emergency costs

Are Personal Loans a Good Idea?

Personal loans can be helpful when used responsibly, but it’s important to compare rates, understand fees, and ensure the monthly payment fits your budget.