What Are the Different Types of Personal Loans?
Understanding the different types of personal loans helps you choose the one that best fits your financial goal, whether that's debt consolidation, a home improvement project or an emergency expense. Some kinds of personal loans may have additional requirements, higher fees or be easier to qualify for than others. Here's a closer look at five common types of personal loans, how to apply for a personal loan and alternatives to consider.
What Is a Personal Loan?
A personal loan is an installment loan you can use for a variety of purposes. This is a contrast to auto loans or mortgages, which must be used for that specific purpose. Common uses for personal loans include debt consolidation, home improvements, large purchases or covering unexpected expenses. Some lenders offer personal loans of up to $100,000 or more, depending on your credit and other factors.
Personal loans typically have fixed interest rates and monthly payments that stay the same throughout the loan term, which usually ranges from one to seven years. Many personal loans can be repaid early without prepayment penalties or fees, although there may be an upfront origination or administration fee that you won't get back.
Tip: Although not as common as fixed-rate loans, variable-rate personal loans are offered by some lenders. They often start at lower interest rates than fixed-rate loans, but if interest rates rise, your loan payments could too.
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Find APRs from 4.99% to 35.99% and flexible terms of 12 to 120 months. Loan amounts range from $1,000 up to $250,000, with funding available from 1 day up to 3 days.
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Est. monthly payment$31 - $1,806
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Term24 - 60 mo
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Loan amount$5,000 - $100,000
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Loan amount$1,000 - $50,000
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Est. APR8.99 - 35.99%
Loan amount$2,000 - $50,000
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Term24 - 60 mo
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Loan amount$1,000 - $15,000
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Term12 - 60 mo
Est. APR7.99 - 35.99%
Loan amount$5,000 - $40,000
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Term24 - 60 mo
Est. APR7.99 - 35.99%
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Loan amount$15,000 - $50,000
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Est. APR6.39 - 24.99%
Loan amount$20,000 - $250,000
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Est. APR9.99 - 35.99%
Loan amount$1,000 - $35,000
Est. monthly payment$32 - $1,264
Term36 - 60 mo
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Term36 - 60 mo
View all of our Best Personal Loans for 2026 to see what you’re likely to qualify for, and the rates and terms you might get.
5 Types of Personal Loans to Consider
The best personal loan for you depends on your needs and creditworthiness. Here are several options to consider.
1. Unsecured Personal Loans
Many personal loans are unsecured loans, meaning they don't require collateral the lender can take ownership of if you default on the loan. Unsecured loans are riskier for lenders, so they may have higher fees, interest rates and credit requirements than secured loans. Some lenders offering unsecured personal loans specialize in lending to borrowers with good credit; others are open to borrowers with fair credit or better.
2. Secured Personal Loans
Secured personal loans require collateral, often money in a savings account, money market account or certificate of deposit (CD). If you don't repay the loan, your lender can take your collateral. Secured loans are less risky for lenders, so they may be easier to qualify for and have lower interest rates or higher loan limits. Although less common than unsecured personal loans, secured personal loans are available from credit unions, banks and online lenders. One type of secured personal loan, a credit-builder loan, is designed specifically to help borrowers build credit.
Learn more: Secured vs. Unsecured Personal Loans: What's the Difference?
3. Debt Consolidation Loans
People often get personal loans to consolidate high-interest debt, such as credit card debt. As a result, many personal loans are marketed as debt consolidation loans. If you qualify for a debt consolidation loan with a lower annual percentage rate (APR), you can use it to pay off higher-interest debts and save money on interest. Making one fixed monthly payment on a personal loan can also simplify budgeting compared to juggling multiple credit card payments.
Tip: Some lenders advertise personal loans for specific uses such as wedding loans, funeral loans or emergency loans. In reality, however, these are simply marketing terms used to target people seeking loans for that purpose. The loans themselves are usually personal loans, with no requirement to use the funds for any stated purpose.
4. Joint or Cosigned Personal Loans
If you have poor credit, a joint or cosigned personal loan may be an easier way to qualify for the loan you want. Both types of loans involve a second person, whose income, debts and credit score are considered along with yours when lenders evaluate your loan application.
A creditworthy cosigner or joint borrower can help you qualify for larger loan amounts and better terms than you would on your own. There are important differences between the two types of loans.
- Joint personal loan: You and your co-borrower both have access to the loan funds and are responsible for repaying the loan.
- Cosigned personal loan: The primary borrower receives the funds and is responsible for repayment. The cosigner is only responsible for payments if the primary borrower defaults.
5. Personal Line of Credit
A personal line of credit differs from a traditional installment loan, but can be used for similar purposes. Unlike a lump-sum installment loan with fixed monthly payments, a personal line of credit (PLOC) is a revolving credit account you can tap as needed, repaying only what you borrow.
A PLOC starts with a three- to five-year draw period during which you can access the credit line and make only minimum payments on the amount borrowed. After the draw period, you repay the balance over a term lasting up to 10 years. PLOCs typically have variable interest rates, making payments less predictable.
Tip: PLOCs' flexibility can make them a good fit for ongoing financial needs or unpredictable costs, such as major home improvements.
Learn more: Personal Loan vs. Personal Line of Credit: What's the Difference?
Personal Loans to Avoid
For most people, the following types of personal loans are generally best avoided.
- Payday loans: Payday loans have very high fees, sometimes equaling a triple-digit APR, with payments generally due within two weeks. Borrowers often resort to getting new loans to pay off the old loan, resulting in a debt cycle that's hard to escape.
- Title loans: Auto title loans offer quick access to cash but use your vehicle as collateral, have short repayment terms and charge high interest rates. If you can't afford a payment and the lender repossesses your vehicle, you could be worse off than when you started.
- Pawn shop loans: Pawn loans may be cheaper than payday loans, but you risk losing the items you pawn or having to pay fees to extend the repayment term.
- Credit card cash advances: Using your credit card to get cash from an ATM, bank or convenience check generally isn't a good idea. Cash advances usually charge higher APRs than credit card purchases, begin accruing interest immediately and may involve a fee.
These loans can be tempting if you have poor credit, but high fees or interest rates and short repayment terms can make them difficult to repay, worsening your financial situation.
How to Get a Personal Loan
Follow these steps to get a personal loan.
- Decide how much you need. Having a figure in mind helps you select the right lender and avoid running out of funds. Keep in mind any fees the lender may deduct from your loan disbursement.
- Research your options. You can get personal loans from banks, credit unions and online lenders. Look for lenders offering the types of personal loans you're interested in, or visit online marketplaces that connect borrowers with a variety of lenders. For example, Experian can show you personal loans matched to your credit profile.
- Get prequalified. Prequalification with several lenders provides an estimate of the loan terms and amount you may qualify for. Prequalifying usually involves a soft credit inquiry, which doesn't impact your credit scores.
- Compare offers. Look for the best loan, focusing on the APR, which includes the interest rate and any loan fees to reflect the total cost of borrowing. As you compare personal loan offers, also consider loan terms and whether interest rates are fixed or variable. Use a personal loan calculator to see how different interest rates and loan terms might affect your monthly payments.
- Choose your offer and apply. You can typically apply for a personal loan online. You'll need to provide personal and financial information and agree to a hard credit inquiry, which can have a small, temporary negative effect on your credit scores.
- Receive your funds. If your loan application is approved, carefully review the terms and sign the loan agreement. You'll typically receive your funds one to five days later, often by direct deposit.
Learn more: Personal Loan Requirements to Know Before You Apply
Personal loan calculator
When to Use a Credit Card Instead
While personal loans can be a good fit for many situations, using a credit card may make more sense in these cases:
- The credit card has a lower interest rate. Yes, credit cards often have high interest rates, but if your other option is a high-interest short-term loan, the interest on a few-hundred-dollar credit card balance over a few weeks is usually more affordable if you repay the balance quickly. A $300 payday loan with a two-week payment period might cost you $45. A $300 credit card balance with a 28% APR costs about $3 in interest over the same period.
- You can qualify for a 0% introductory APR offer. Good credit may qualify you for a credit card with a promotional 0% intro APR on purchases, balance transfers or both. Depending on your credit limit, you might be able to use the credit card instead of a loan to pay for a big purchase, or transfer high-interest credit card balances onto the new card to pay them off. (Be sure to consider any balance transfer fees—typically 3% to 5% of the amount transferred.) You'll have until the introductory period ends to pay off your balance without accruing additional interest.
Be aware: Be sure you can pay off the balance on a 0% intro APR card before the promotional period ends. Otherwise, you'll pay the card's standard rate on the remaining balance and might be better off getting a personal loan with a longer repayment term.
Learn more: Personal Loan vs. Credit Card: What's the Difference?
Frequently Asked Questions
The Bottom Line
Since lenders generally reserve their lowest interest rates for borrowers with good credit, it's a good idea to check your credit report and credit score well in advance of applying for a personal loan. You can check your Experian credit report and FICO® ScoreΘ for free to see what aspects of your credit may need some work. Paying down credit card balances and making timely payments could improve your credit score, which may save you money on interest.
Experian Boost®ø could help too. Experian Boost is a free feature that adds your eligible cellphone, utility, rent, streaming and insurance payments to your Experian credit report, which could help increase your credit scores before applying for a personal loan.
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About the author
Karen Axelton
Karen Axelton specializes in writing about business and entrepreneurship. She has created content for companies including American Express, Bank of America, MetLife, Amazon, Cox Media, Intel, Intuit, Microsoft and Xerox.
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