APR stands for annual percentage rate and refers to the extra amount borrowers pay on top of their loan amount, or principal. APR is different from your interest rate; it equals your interest rate plus any loan fees.

What's the difference between a secured loan and an unsecured loan?

Secured loans are backed by a piece of the borrower’s property as collateral, typically a vehicle or house. Because the borrower stands to lose personal property if they default, secured loans tend to have lower interest rates. Unsecured loans are not backed by collateral, but instead by the borrower’s creditworthiness. Because the lender takes on more of a risk with an unsecured loan, interest rates tend to be higher. Lenders also require that borrowers seeking unsecured loans have higher-than-average credit scores. Learn more about the key differences between secured and unsecured loans.

What documents are required for personal loans?

You will generally need several documents to apply for a personal loan, including documents that prove your identity and financial status. You'll generally need at least an ID, income verification and proof of address. These documents and the rest of your information will help the lender determine what origination fee you will pay if applicable.

How much will a personal loan cost?

Personal loan costs vary by lender. For excellent credit, there are some lenders that don’t charge any fees. You’re only responsible for paying back the principal (or the amount you borrowed) plus interest. The lower your interest charges, the less you’ll pay back over the life of the loan.

Where can I get a personal loan?

When it comes to shopping for personal loans, the better your credit score, the more options you have. Generally speaking, there are three main places that provide personal loans: Online lenders: Online lenders also make it easy to compare rates, APRs and fees and apply online. Banks: Applying with a bank could get you a lower rate or access to other member benefits if you have an existing banking relationship. Plus, it could be a good option if you prefer in-person customer service Credit unions: A local credit union may offer more affordable rates and fees than banks and online lenders, especially if you're already a member. However, it's important to be aware that some credit unions may not offer prequalification, so applying could cause a temporary dip in your credit score.

What can you use a personal loan for?

While it may depend on the lender, a personal loan can generally be used for any legal expense. The most common uses for a personal loan are debt consolidation, home renovations and emergency expenses. However, some lenders do restrict certain uses, like using the funds to pay for education-related costs.

How much can you borrow with a personal loan?

The exact loan amounts available often depend on your credit score and the lender. Borrowers with excellent credit are more likely to have access to the full range of loan amounts that a lender offers. Most lenders have minimum loan amounts from $1,000 to $5,000, and maximums can stretch from $50,000 to $100,000.

How do you calculate your debt-to-income ratio?

Lenders often use your debt-to-income ratio — your total debt as compared to your annual income — as an indicator of financial health; most recommend a DTI of under 50 percent for approval. Before applying, calculate your DTI through a calculator or manually add up your debts and divide the total amount about your monthly gross income.