A personal loan is an unsecured loan that can be used to pay for almost anything, from consolidating debt to renovating your kitchen.
Unlike secured loans that require collateral, such as your car or house, a personal loan is backed only by your promise to repay the lender. To determine your eligibility as a borrower, lenders may look at your:
- Credit score
- Other debts
A lender determines your interest rate based on your creditworthiness, the type of loan and the length of the loan. To get the best offers on a personal loan, borrowers should have a long history of on-time payment, steady income and a low debt-to-income ratio.
Personal loans are paid back in fixed monthly payments, typically over 12 to 144 months.
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