Personal loans are a type of instalment loan. You receive a lump sum of money upfront, and then repay that amount over a set period of time. Payments are typically made monthly and are most often fixed. Unlike credit cards, interest rates on personal loans are also fixed, which means your monthly payments won’t change with rising interest rates.
Repayment terms: Repayment terms can extend from under one year to over 10 years, depending on the lender and loan purpose. But most personal loan terms range from two to seven years.
Loan amounts: Loan amounts are typically available between $1,000 and $50,000, depending on the lender and what you can qualify for. But some lenders offer loan amounts up to $200,000 and extended repayment terms for specific loan uses, like home improvement.
Interest rates: Annual percentage rates (APRs) on personal loans run from around 7% to 36%. The rate you get depends largely on your FICO credit score, your income, and your current debt. If you have good or excellent credit, you’re most likely to qualify for the best rates; whereas, if you have fair or poor credit, the rate you qualify for may be over 30%, if you can qualify at all.
Fees: Some loans charge upfront fees, typically called origination fees, which are deducted from the loan amount. If a lender charges an upfront fee, it’s expressed as part of the APR, along with the interest rate. Lenders are required by the Truth in Lending Act (TILA) to display APRs over interest rates, so that borrowers can better compare overall loan costs. Fees that are avoidable, like late fees or insufficient funds fees, are not expressed in the loan’s APR.
Funding times: One of the biggest benefits to personal loans is how quickly they can fund relative to other loan types. If approved, most personal loan lenders can disburse funds within a few business days; some can send money as soon as the same day you apply. Applying is often lightning quick, with instant approval decisions possible, especially if you have very good credit.
