2025's Best Personal Loans 28,297+ Reviews

A personal loan is money consumers borrow from lending companies, whether that be banks, credit unions, or online lenders. You can use personal loans for a variety of things, but they are most commonly used for consolidating debt. Whatever your reason for wanting a personal loan, there are some things you should know beforehand regarding personal loans in general and personal loan companies. You don’t want to be locked into a contract and find out the company you’re with isn’t right for you. We’ve created a personal loan guide and gathered a list of the best personal loan companies to make your research and decision process that much simpler. We also have thousands of personal loan reviews to help you make your purchasing decision.

Here’s everything you need to know before becoming a personal loan borrower.

You Can Use Personal Loans for Debt Consolidation — But Be Cautious

Consolidating existing debt is the most common purpose for a personal loan. This is a way to simplify and combine multiple debt obligations into one debt. By paying existing debt with your personal loan, you could have less debt to worry about and fewer interest charges working against you. Most personal loans have lower interest rates than credit cards, so many people use personal loans to pay off credit card debt to save money in the long run.

Before you decide if a personal loan will work for you to effectively consolidate your debt, ask yourself these questions:

“Can I afford the new monthly payment?”
“Do I have a repayment plan?”
“Comparing interest rates and terms and total payoff amounts of my current debts against a potential personal loan, would taking out the personal loan save me money?”
“At my current financial pace, would it take more than one year to pay off my current debt?” (Any less than that and debt consolidation likely wouldn’t be worth it.)
“Will I keep my spending under control and avoid accruing additional debt after receiving a personal loan?”
“Do I have a good enough credit score to get me a reasonable interest rate offer on a personal loan?” (You can get a free credit check and complete credit report sent to you every 12 months from each of the three credit reporting agencies. Visit annualcreditreport.com to do so.)

If you answered “no” to any of the above questions, debt consolidation may not be for you.

Avoid Closing Your Credit Card Accounts If You Decide to Consolidate Your Debt with a Personal Loan

Even if you decide to consolidate your credit card debt with a personal loan to obtain a $0 balance, don’t close your credit card accounts. Closing your credit card accounts will actually hurt your credit, especially if you’re closing multiple in a short time frame. Unless there are high annual fees you want to avoid paying, consider keeping your credit card accounts open. The length of your credit card history will affect your credit score, and keeping your accounts open, even if there is little or no activity, will improve your credit over time.

Personal Loans Are Typically Unsecured Loans

Most personal loans are unsecured loans. An unsecured loan is not backed by any collateral like mortgages and car loans typically are; this means if a borrower fails to comply with the loan terms and doesn’t pay back the full amount, the lender cannot take any of the borrower’s property like they would with a home or car loan. With no collateral to ensure payment, this is riskier for the lender, so an unsecured loan typically has higher interest rates than a secured loan.

However, if you have little or poor credit, lenders may give you the option of a secured personal loan that would require you to offer up some sort of collateral. This guarantees lenders would have something to pay back the loan with, in the case you default on the loan. Common forms of collateral are houses, cars, stocks, etc.

Personal Loans Are Fixed-Rate Installment Loans

Similar to a mortgage, personal loans are a type of installment loan. This means you pay the loan off over a specified amount of time agreed upon by the lender, and you have set payment due dates throughout the duration of your loan. Personal loans are also typically fixed-rate loans, which means your interest rate is not subject to change like a variable rate is. However, be sure to check with the personal loan provider to be sure.

Consider a Personal Loan’s Annual Percentage Rate (APR)

An important consideration when deciding on a personal loan company is the offered APR. The APR is your interest rate as well as the added fees you will pay. If no additional fees apply, your APR is simply your interest rate. Note that late fees are not included in the APR, so if you fail to pay on time, you will have additional costs to cover.

Common APRs typically range between 5 percent and 36 percent. Your personal loan APR is heavily weighted by your credit profile, so the better your credit, the better APR you will get. Shorter-term loans will also lower your APR because you will have to repay the loan more quickly.

What is the credit score requirement for personal loans?

This will vary based on the lender, but many personal loan companies require at least a 640 credit score or higher. Compare the top personal loan companies to see what credit score they require as well as other offerings, such as their APR range, max loan amount, and max loan length.

Will applying for a personal loan hurt my credit?

Yes and no. Taking out a personal loan will show up as a hard inquiry on your credit report, which will drop your credit score by a few points. However, if you pay your loan payments on time and create a positive payment history, this will boost your credit score and demonstrate to future lenders you are responsible with your debt. Ultimately, whether or not a personal loan positively or negatively affects your credit score, in the long run, is determined by how responsibly you complete your loan repayment, how good your credit history is, and what the rest of your financial history looks like.

However, only applying for a personal loan without accepting will not yet hurt your credit if you apply through lenders that do a “soft credit check” of your credit report rather than a “hard credit check.” Especially if you plan to apply for personal loans from a variety of different companies, make sure the loan providers do soft inquiries of your credit report until you choose to officially accept the loan.

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How long does it take to receive my personal loan?

This varies based on the personal loan company and your bank. Online personal loan lender Best Egg, for example, has an instant decision process, and you can receive funds into your savings or checking account in as little as one business day after required documents are received and approved.

How long do personal loans last?

The most common personal loans typically last between one to five years, depending on the lender you choose.

Are there restrictions to what I can purchase with my personal loan money?

Unless a lender specifies otherwise, you can spend your personal loan on whatever you’d like. Different from mortgages or auto loans, there is not a fixed purpose for the loan. Common reasons for taking out a personal loan are for funding home renovations, paying off a student loan or medical debt, debt consolidation, or any other pressing expenses.

How much money can I borrow with a personal loan?

Loan amounts will vary based on the lending provider. Typically, personal loans can range anywhere from $2,000 to $50,000. However, some personal loan companies, such as SoFi, offer as much as $100,000. Make note that just because you’re accepted for a large personal loan, that doesn’t mean you should take the entire offered amount. Consult your budget and your financial history to determine which loan amounts will work best for your situation. You don’t want to agree to a monthly amount you can’t afford to pay. This could lead to a late payment or other complications.

Are there upfront fees when taking out a personal loan?

Typically, yes. The majority of personal loan companies require an origination fee. However, most lenders take the origination fee from the borrowed amount, so the fee is taken out before you receive the loan funds. For example, if you applied for a $5,000 loan and the lender required a 3 percent origination fee, you would receive a total of $4,850.

What is an origination fee?

The origination fee is the upfront fee most personal loan companies charge when you take out a personal loan. It typically ranges from 1 percent to 6 percent of the total loan amount. The origination fee varies based on the personal loan company and your credit profile. However, if you have good credit and are still required to pay a high origination fee, you may want to look into other personal loan providers that do not require such high fees.

Do personal loans require a loan application fee?

No, the majority of personal loan companies do not require a loan application fee. If you apply for a loan and are denied or you decide not to take the offer, most likely no fees will apply.

What are prepayment fees?

Prepayment fees are when a lender charges for paying off a loan more quickly than the agreed upon time.

Do personal loan companies charge prepayment fees?

No, the majority of personal loan companies do not charge prepayment fees or have any sort of prepayment penalty. However, be sure to consult the loan provider, as not every lender is the same.

What is the best personal loan company?

Personal loan companies are ranked according to customer reviews and important criteria related to the personal loan industry.

Factors taken into account when ranking a lending company include consumer review star-rating (most heavily weighted metric), max loan amount, max length of the loan, APR percentage range, state availability, and time in business.

You should seriously consider these factors when selecting a personal loan company. On BestCompany.com, we have already gathered these crucial data points and have ranked each personal loan provider based on these factors. To read specific personal loan reviews from real consumers, check out our personal loans home page and see a list of our top-ranked and best personal loan companies.

Want to see our highest-ranked personal loan company, Best Egg? Visit Best Egg's Review Page.

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