Personal loans let you borrow a lump sum and pay it back over time in fixed monthly installments. They are usually unsecured, meaning they don’t require collateral like a house or car.

Basic idea

With a personal loan, a lender gives you a set amount of money upfront, and you agree to repay that amount plus interest over a specific term (for example, 1–7 years). Most personal loans have fixed interest rates and fixed monthly payments, so your payment amount stays the same throughout the loan.

What they’re used for

People commonly use personal loans to:

• Consolidate high-interest debt such as credit cards.
• Cover large expenses like home repairs, medical bills, weddings, or major purchases.
  Because the funds are paid as a lump sum into your account, you can generally use the money for almost any legal personal purpose.

How approval works

To decide whether to approve you and what rate to offer, lenders typically look at:

• Credit score and credit history.
• Income and employment, and your debt-to-income ratio (how much of your income goes to existing debts).
  Stronger credit and lower existing debt usually mean lower interest rates and better terms.

Key costs and terms

Important parts of a personal loan include:

• Interest rate and APR: APR includes interest plus certain fees (like origination fees), and for personal loans it often ranges roughly from the mid-single digits up to around the mid-30% range depending on your credit.

• Term length: Often between 1 and 7 years; shorter terms mean higher monthly payments but less total interest, while longer terms lower the payment but increase total interest paid.

Risks and things to watch

If you miss payments, you can be charged late fees and your credit score can drop, and in serious cases the lender can send the account to collections. Even though most personal loans are unsecured, defaulting can still make it harder and more expensive to borrow in the future. It is important to compare offers from multiple lenders, watch for fees, and make sure the monthly payment comfortably fits your budget before signing.