Question 1

What is a personal loan?

Accepted Answer

Personal loans are short-term loans that consumers can receive from banks, credit unions or private lenders like online marketplace lenders and peer-to-peer lenders. The loan funds can be used for just about any purpose, such as paying off other debt, financing a home renovation or paying for family needs, like a wedding or adoption.

A personal loan is repaid in monthly installments, similar to a car loan or home mortgage, with loan terms ranging from 24 months to 60 months or even longer. Personal loans are typically unsecured, meaning they are not backed by collateral such as a car, house or other assets. If you need cash fast, these loans are a good choice because the approval and funding process is often faster than that of a home equity line of credit, which lets you borrow funds as you need them rather than in a lump sum.

Question 2

What is APR?

Accepted Answer

APR stands for annual percentage rate. It 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.

Question 3

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

Accepted Answer

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.

Question 4

How much will a personal loan cost?

Accepted Answer

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.

Calculate your potential loan payments to help you decide whether you can afford the personal loan you’re considering.

Question 5

Where can I get a personal loan?

Accepted Answer

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 to get a personal loan:

Online lenders: Because all of the loan application process can be done online, this could be a convenient way to apply and receive funds quickly. Online lenders also make it easy to compare rates, APRs and fees.
Banks: Some banks, like USAA and CitiBank, offer personal loans. Applying with a bank could get you a lower rate if you have an existing checking or savings account with the bank. This could also 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.

Question 6

What can you use a personal loan for?

Accepted Answer

How your personal loan can be used is open as long as it’s for a legal purpose. The most common uses for a personal loan are debt consolidation, home renovations and emergency expenses. However, you can't use personal loan funds to pay for your education costs, and some lenders may restrict usage further. Payoff, for instance, limits its personal loans to credit card debt consolidation.

Question 7

How much can you borrow with a personal loan?

Accepted Answer

The exact loan amounts available often depend on your credit score. The good news is that with excellent credit, you'll likely 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.

Question 8

How does the coronavirus affect personal loans?

Accepted Answer

The impact of COVID-19 has left millions of Americans without a reliable source of income, and many may be searching for personal loans to cover emergency expenses. In response to unprecedented market conditions, some banks announced new loan offerings and lower interest rates, though many have also tightened their eligibility requirements.

For existing borrowers, some lenders have extended their loan relief programs into 2021, waiving fees or letting customers temporarily defer payments. Long-term unemployment will mean some borrowers continue to rely on these programs, says Greg McBride, Bankrate’s chief financial analyst. He encourages those who are having trouble making payments on their personal loans to contact their lenders rather than ignoring the problem.

Question 9

What are coronavirus hardship loans?

Accepted Answer

Coronavirus hardship loans are short-term personal loans designed by lenders specifically to help people affected by the coronavirus pandemic. These loans are typically less than $5,000 and may have to be repaid within three years or less. Coronavirus hardship loans are popular among credit unions, in particular. If you need short-term relief, ask your local credit union about its offerings.


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