A personal loan is a type of debt that you can use to pay for expenses like home improvements, weddings or vacations. Personal loans typically have fixed interest rates and repayment terms of up to seven years. They can be unsecured, meaning you don’t need to put up any collateral to secure the loan. Most lenders report your repayment activity to the credit bureaus, which can help you build a positive credit history if you make your payments on time.
Personal loans are available from banks, credit unions, online lenders and consumer finance companies. Banks may offer perks such as lower fees and faster funding, while credit unions may provide a more personalized experience. Some lenders also specialize in certain types of borrowers, such as military members or those with unique credit challenges.
Before applying for a personal loan, be sure to review your credit report and income to ensure you qualify. Lenders may check your credit to assess your risk, and if you have negative items on your report such as late payments or collections accounts, you could be rejected for the loan.
Personal loans can be an excellent way to cover unexpected expenses or consolidate existing debt, but they should not be used to fund unnecessary spending. Be sure to compare your options and shop around for the best rates and terms. You can start by checking your free Experian credit score and report, which can help pinpoint areas where you need to improve your score.