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How to get a personal loan in easy steps on Credello
Follow the steps below to generate a list with the best personal loans available to you.
1. Select a use for your personal loan.
Choose what you will use the personal loan for from our list of options, from debt consolidation to large purchase and more.
2. Enter loan details.
Tell us how much of a loan you’re looking for, and how long you want your loan term to be. This helps us filter out lenders that cannot meet your needs. best lender for you.
3. Share additional details.
Information about your location, credit score and income can help us find the best options for you. The more detail we have the easier it is to you which lenders you are likely to qualify for.
4. Compare your options
Compare loan options in key areas like estimated APR, monthly payment, and fees. Or take cues from our unbiased full reviews of each lender.
Why trust Credello’s recommendations?
At Credello, we work to help you find the right financial product for you through an easy and interactive online shopping experience. With our tools, we provide personalized, on-demand recommendations so you can feel confident in your decisions.
Across all lenders featured on Credello, loan APR may vary from % and up to % for terms ranging from to months. Depending on the lender, an origination fee ranging from % to %, may also apply.
Loan example: Assume you choose a 3-year, $10,000 personal loan with a 5% origination fee and a 14.8% APR. You would receive $9,500 and make 36 monthly payments of $328.39. Monthly payments will cover the loan amount of $9,500 and total interest of $2,322.07.
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What is a personal loan?
A personal loan is a type of unsecured loan with a fixed interest rate, meaning borrowers don’t have to offer collateral to get the loan, and the interest and monthly payments will not change over time. Usually, these loans are for an amount ranging from $ to $ with loan terms of - months, depending on the lender. You then make monthly loan payments to repay the loan over a designated period of time.
You can get a personal loan from banks, credit unions, or online lenders. Typically, the better your credit score, the lower APR rate you will qualify for. Then, you can use the funds for just about anything you need extra cash for.
Personal loans can be secured or unsecured. Secured means you must provide some kind of asset as collateral, such as a car, house, or savings account, in order to qualify for the loan and get a decent interest rate. Unsecured means you do not have to do this. If you have a bad credit score, a secured loan may help.
Loans can also have variable or fixed interest rates. Variable means the rates can change over time, therefore changing your monthly payment. Fixed rates mean they stay the same over the life of the loan, so your monthly payment is the same. Fixed rates are much easier to budget for, and calculate how much you'll actually pay over the life of the loan.
Need cash to fund a large purchase or consolidate debt, and
Are able to get a personal loan at a lower interest rate than other forms of credit (like on a credit card), and
Can afford the monthly payments throughout the entirety of the loan term.
For example, if you're using a personal loan to consolidate debt, the loan should ideally have a lower interest rate than your existing debt so that you can save money and pay the debt off faster. Or, if your plan is to use it to fund something else or support a large purchase, you need to be sure you can afford the payments and your credit score is high enough that you can get a lower interest rate.
Reasons to get a personal loan
Personal loans are most often used for credit card debt consolidation. But you may also consider taking out a loan for a variety of other reasons, including:
Credit card debt consolidation : If you have multiple credit cards with outstanding balances, personal loans can be used to consolidate those debts to one, helping to lower your interest rate and pay off your debt faster.
Home improvements : If you’re planning home renovations or improvements, a personal loan can help you afford these upgrades, especially if you want to avoid a home equity loan or home equity line of credit.
Debt consolidation : If you have multiple other types of outstanding debt, like other loans or credit cards, you can consolidate debt using a personal loan. using a personal loan. Use the personal loan to pay off the outstanding debt, consolidating your payments to one and lowering your interest rate.
Medical debt : Medical bills can add up fast even if you have health insurance, and you can use a personal loan to pay them off and keep them from going to debt collectors.
Moving : Renting a moving truck or moving company, equipment for moving, and other moving-related expenses can take a toll on the excitement of getting a new place. Use a personal loan to cover these expenses, plus new furniture, appliances, or other costs.
Building credit history : If you don’t have great credit, or have a short credit history, taking out and paying off a personal loan on time can help.
Funding higher education : Pay off or consolidate private student loans, or use a personal loan to help pay for other post-secondary expenses such as rent, utilities, books, etc.
Other expenses : Fund a wedding, vacation, or other large purchase with personal loan funds.
The first time a personal loan affects your credit score is when you apply. This triggers a hard credit inquiry, which can decrease your score by a few points for about a year.
Then, you have the chance to actually improve your score with a personal loan. Payment history makes up 35% of your credit score, so paying off your loan on time every month helps build credit in the long-term. However, missing a loan payment, usually by more than 30 days, can significantly decrease your score.
If you use a personal loan to consolidate debt, you can lower your credit utilization, which accounts for 30% of your score. The lower your credit utilization ratio, the better. Plus, personal loans can help improve your credit mix, which can increase your score.
How long does it take to get approved and get a personal loan?
The amount of time it takes to get approved for a personal loan and get the actual funds depends on factors such as the financial institution and whether you provided all necessary information and documentation in the application.
Typically, online lenders approve loans the fastest, sometimes within just a few minutes. Banks and credit unions take longer, but usually within a few business days.
Once you’re approved for the loan, you have to review and accept the loan’s terms. After that, you’ll be sent the funds. The fastest way to get them is via direct deposit, because a paper check can take longer to mail. Online lenders may be able to do this transfer quickly, even within 24 hours of accepting the loan. In other cases, it may take 3-5 business days.
If you have good to excellent credit, getting a personal loan can be faster and easier, though you can still qualify even if you don’t have great credit. There are essentially seven steps to getting a personal loan:
Check your credit score and take steps to improve it now, if necessary. Or, use the information to help you prequalify for the loan or estimate interest rates.
Compare estimated rates from different lenders. Or, use a personal loan calculator to compare personalized estimates.
Get prequalified. When possible, get prequalified since it doesn’t affect your credit score but can give you personalized, estimated rates and monthly payments.
Shop and compare different lenders, including rates, terms, fees, customer service ratings, and types of loans. Also check out banks, credit unions, and online lenders for the best options.
Read the terms and conditions carefully to understand any penalties, fees, payment options, APR, imitations, and other features so avoid any surprises once you apply for the loan.
Apply once you choose a lender that works best for you. Most lenders let you do this online in just a few minutes, but you may be required to provide information or documentation to expedite the process. The lender will then run a hard credit check to check your credit score and history.
Get approved and accept the loan. You’ll then get the funds deposited to your bank accounts and must start making payments right away.
If you have bad credit, there's always the risk of not getting approved for a loan at all. Or, you may have a higher interest rate. Some ways you can help your eligibility are to:
Optimize your credit score : If you’re able to increase your score and improve your credit history, you may increase your chances of qualifying for the loan and getting a better interest rate.
Make sure you can repay the loan : If you’re unable to make payments on time, or miss payments entirely, you can be charged additional interest and fees, and get further in debt. If you can’t afford to repay the loan, consider other financing options or waiting until you’re in a better sport before taking out the loan.
Pre-qualify online : Most lenders let you get prequalified online, and because it only requires a soft credit check, it doesn’t affect your credit score. By entering a few pieces of information, like your credit score and desired loan amount and term, you can get personalized estimates of your loan interest rate, term and monthly payment. This can help you more accurately compare lenders.
Consider getting a cosigner or secured loan : if the lender allows it. Doing this can help you get approved because the lender will feel you are less risky of a borrower, and more confident in your ability to repay the loan.
What is prequalification and how to prequalify for a personal loan
When you get prequalified for a personal loan, your credit score is not impacted. But, this quick and easy process can help you get an estimate of the loan amount and terms the lender is willing to offer you based on factors like your credit score, credit history, and income. While prequalification isn't a guarantee for approval, it can help you accurately compare lenders and loan options. When comparing lenders, look for the option to prequalify online. Enter basic information about yourself like your income, credit score, employment and homeowner status. Then, get personalized solutions for you.
What should you do before you apply for a personal loan
Before applying for a personal loan, the first step is to check your credit score. Because most lenders will give better interest rates and conditions to borrowers with good to excellent credit, it's important to have a strong score and history. You should also understand the loan amount you need, and how long you'll need to repay it. Then, be sure to analyze your budget and factor in your loan monthly payments, ensuring you're able to afford them while avoiding other debt.
Looking for the right personal loan for you
With just a few answers from you we can generate a list of personal loan options perfectly tailored to your needs.
Best place to get a personal loan
There are primarily three places you can get a personal loan:
Banks : Both local and national institutions typically offer personal loans, and can be a great option for borrowers who already have an existing relationship with a bank. Otherwise, banks may have higher interest rates than the other two options.
Credit unions : If you are a member of a credit union, you may find their personal loan interest rates are more favorable, even if you don’t have excellent credit. Because you must be a member, not everyone is eligible.
Online lenders : Unlike banks and credit unions, online lenders do not have in-person application or support options available. These lenders typically offer a variety of products, including personal loans, and often have lower interest rates (even for borrowers with bad credit). The application, approval, and funding process is also typically faster, even in as little as 24 hours.
Peer-to-peer loans : P2P loans are personal loans funded by individual investors or institutions, such as a hedge fund or an insurance company, but not a bank. Like online lenders, P2P loans can be done over the phone or computer with a loan officer. These can be a good option if you have a low credit score.
Banks vs. credit unions vs. online lenders vs. Peer-to-Peer
Banks
Credit Unions
Online lenders
Peer-to-Peer
In-person customer service support
Federal credit unions cap their APR at 18%
Faster application, approval, and funding process
Similar to online lenders, it is a faster application, and approval process but funding can take longer
Streamlined process and possible lower interest rates for existing customers
Must be a member to be eligible for a loan
Typically have lowest APR rates and fees
Peer-to-peer lending companies check eligibility through pre-qualification and will do a soft credit pull which won’t impact your score
Higher interest rates for non-customer
May have better interest rates for borrowers with fair credit
Good option for borrowers with bad credit or credit history
Good option for borrowers with bad credit but they may have higher interest rates
May charge higher fees and penalties
Tips for comparing personal loans
Once you've decided a personal loan is the right financial move for you, it's important to shop around and compare lenders to find the best option. You'll want to compare factors such as:
APR
Loan terms
Monthly payments
Other features, such as debt consolidation assistance, flexible payment options, or payment deferment options
Customer service ratings
In most cases, the lender who offers the lowest APR is the best choice, but you'll want to make sure that the monthly payments are affordable. Also consider if the loan's term is longer and the monthly payments lower, you'll end up paying more in interest over the life of the loan.
Average personal loan interest rates by credit ratings
Average personal loan interest rates vary by lender, and are based on the borrower's credit score. Typically, the better your credit score, the lower the interest rate you can get. According to Federal Reserve data, in 2021 the average APR on a two-year personal loan was 9.58%.
Credit Band
Credit Score Range
Average Personal Loan Interest Rate
Excellent
720-850
10.3% – 12.5%
Good
690-719
13.5% – 15.5%
Fair
630-689
17.8% – 20.8%
Bad
300-629
26.1% - 32% (though more difficult to qualify)
Last update: May 19, 2022
Keep in mind that APR includes both interest rates and fees. These fees could include application fees, origination fees, prepayment penalties, late payment fees, returned check fees, payment protection insurance, and others. Check with the lender and be sure to understand any fees you may be charged so there are no surprises.
A good personal loan rate really depends on your credit score, debt-to-income ratio, the lender, and a few other factors. A good personal loan rate is lower than the national average which is 9.41% but all the factors mentioned above make most personal loan interest rates fall between % to %
How are APRs determined for personal loans?
With personal loans, the APR is determined by the cost of the loan, including interest and the origination fee and is then expressed as a percentage. How good your credit score is the main factor in determining your APR on a personal loan. The better your credit score and your payment history on your credit report, the more likely you are to qualify for a good APR. The goal of a good APR lets you repay your balance on time every month or even ahead of schedule.
Alternatives to personal loans
Personal loans are not your only option when it comes to getting cash for a purchase or funding a project. There are other alternatives including:
Balance transfer credit card: If you have outstanding credit card debt and are looking to consolidate, you can do so with a balance transfer credit card. You’d transfer the balance(s) of your high-interest card(s) to a balance transfer card that has a 0% promotional APR. This allows you to pay down the debt without accruing more interest. However, be sure to pay the balance before the introductory period is over, because the card may have a much higher interest rate. Related: How to Transfer Credit Card Balance
Home equity loan: If you own your home, you may be able to borrow against its equity. With lower APRs than personal loans and high limits, this could be a good option. However, the loan is secured by your home, so if you don’t repay it, you could lose your house. Learn more: Home equity loans
Home equity line of credit (HELOC): You can borrow the money you need against your'home's equity, operating much like a credit card, up to the credit limit. While you may get better interest rates and the interest can be tax-deductible if used for home improvement, there could be fees and you could lose your home if you default. Learn more: Home Equity Line of Credit
Cash-out refinance: With this option, you can borrow more than what you need to refinance your home and then keep the difference. While this helps you get a lower APR on your mortgage, it could be costly and you may lose your house if you default.
401(k) loan: While this isn't typically recommended, you can borrow against your retirement funds in a 401(k). Then, any interest you pay goes back into your 401(k). However, this isn’t offered by all employers, and you’d be taxed twice on the amount you borrow, so you may end up losing more than it’s worth. Related: Should You Use a 401k Loan to Pay Off Debt?
Borrow from friends/family: If you have a trusted friend or family member who will let you borrow the funds, this can help you avoid paying interest or losing any collateral. However, you must be sure to repay them within a reasonable amount of time; otherwise, risk ruining the relationship.
How to apply for a personal loan
Determine how much money you need to borrow. The higher the amount, the higher your interest rate may be.
Make sure your credit report is completely accurate and see if there are ways to improve your credit score.
Get prequalified. This gives you personalized estimates for interest rates, monthly payments, and terms.
Compare lenders to get the best rate and terms possible.
Fill out a personal loan application once you've found the best lender for you. Submit any documentation required to expedite the process and help ensure you're approved.
Still can't qualify? Here's what it takes to qualify for a loan
Most lenders prefer that borrowers have a credit score of at least 660 or above, so the first step you should take if you're having trouble qualifying is to improve your credit score as much as possible.
It may also be helpful to pick up a second source of income, because if the lender can feel confident that you'll repay the loan, they may feel better about approving you.
Otherwise, you may want to consider getting a cosigner or secured loan, as those options can help improve your chances of qualifying.
If you're still having trouble, talk to a financial advisor, your bank or credit union, or seek help from an online lender. Ask if they can help you understand why you don't qualify, or give you advice to improve your situation.
Have bad credit, low income, or high debt-to-income ratio?
Don't worry, you can still get a loan. Here are a few options we recommend:
Bad credit
Secured loans : Providing an asset like a car, house, investment or savings account, or other item of value can help the lender feel more confident in you repaying the loan. Otherwise, you'd lose that asset.
Loans with cosigner : If you have a trusted friend, family member, or advisor who will cosign a loan with you, that can be a great way to improve your chances of qualifying. The cosigner needs to have excellent credit and other possible qualifications depending on the lender.
Low income
Side income : Start a side hustle, work extra shifts, pick up a second job, or even ask your current boss for a raise. Anything you can do to earn extra income.
High DTI ratio
Reduce debt : Your debt-to-income ratio is all of your monthly debt payments divided by your gross monthly income. If your ratio is too high, lenders may not feel confident in your ability to repay your loan. By lowering your debt, you can improve your DTI.
Frequently asked questions
What rate should I expect on a personal loan?
The interest rate you can get on a loan depends on factors such as your credit score, credit history, and income. In most cases, if you have an excellent credit score, you can get a lower interest rate, while those with fair or bad credit may have a much higher interest rate. The average rate for someone with excellent credit is 10.3% – 12.5%, but these rates can vary by lender.
Should I take out a personal loan to pay off credit card debt?
Personal loans can be used to consolidate and pay off debt, including credit card debt. Once you get the funds from the personal loan, you can use them to pay off your credit card debt. Then, you only have to make one monthly payment toward your personal loan. This can save you money if the loan’s interest rate is lower than your credit cards, and can also help you pay off your debt faster.
What credit score is needed for a personal loan?
Most lenders require borrowers to have a credit score of at least 660-690 to qualify for a personal loan. And, the better your credit score, the lower the interest rate on the loan. If you have bad credit, consider shopping online lenders as they can typically be more flexible than banks or credit unions.
Does applying for a personal loan affect my credit?
When you get prequalified for a loan, it does not affect your credit score. However, applying for a loan triggers a hard credit check, which does decrease your credit score temporarily by a few points. As long as you continue to make your loan payments, your credit score may even improve.
What’s the difference between a fixed rate and variable rate?
A fixed interest rate means it does not change over time, so your monthly payments will also be the same over the life of the loan. This makes budgeting and calculating a loan payoff date easier. Variable rates can change over time, so you may owe more or less in interest throughout the life of the loan, and your monthly payments can change.
How much can I borrow in personal loans?
Most personal loans range from $undefined to $undefined, but not all lenders offer loans up to $undefined. Check with the individual lenders to understand their limits.
What is the difference between secured and unsecured personal loan?
A secured loan means you must provide some kind of asset as collateral for the loan. This could be a car, house, savings account, investment, or something else of value. Unsecured loan does not require this.
The best way to find a low interest personal loan is to compare online lenders. When you get prequalified with lenders, you can get a unique interest rate estimate based on your credit score, income, and other factors. Be sure your credit score is as high as possible in order to qualify for the lowest interest rate.
What fees should I look out for when choosing a personal loan?
Fees could include:
Application fee
Origination fee
Prepayment penalties
Late payment fees
Returned check fees
Payment protection insurance
There could be others depending on the lender. Read the fine print to understand any fees you may have to pay.
How many personal loans can you have at once?
Technically, you can have as many personal loans as you want, though some lenders have a limit on how many you can have with that particular lender. However, keep in mind that personal loans are debt, and you’re accruing interest on the balance, so the more loans you have the more you’ll end up owing.
Disclaimer: Credello is not a licensed credit repair organization, credit counselor, debt management company, debt settlement company, or any other organization in the business of offering advice as to how to improve or repair your credit. Any information provided on this website that pertains to your credit is not to be construed as credit improvement or credit repair advice from Credello.
