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Personal Loans
10 things to know before applying for a personal loan
Updated Oct 16, 2026
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Key takeaways:
Personal loans are simple, helpful products for people who need to borrow money.
Personal loans typically have fixed interest rates and set monthly payments.
Interest rates tend to be lower for personal loans than credit cards.
See if you qualify. Apply Now
Ready to take control of your financial future? A personal loan could offer a versatile and convenient way to reach your financial goal, whether it's consolidating debt, funding a home improvement project, or covering unexpected expenses.
Once you know how personal loans work and what to look for, you can make informed decisions that align with your priorities. Here are some crucial facts to know about personal loans before you apply.
1. Personal loans are usually unsecured
Unsecured loans don't require collateral (something that you pledge as a guarantee that you'll pay back the loan). With a secured loan, if you don't repay as agreed, the lender can take the collateral.
Why is this important? You don't need to own (or pledge) something of value, like a car or a home, to apply for the loan. This is easier for you and could shorten the time it takes to process and approve your loan application.
2. You can use a personal loan for almost any legal purpose
Many loans are tied to the reason you want them: student loans finance higher education, auto loans finance cars, and mortgages finance real estate. But personal loans can be used for many things. Your lender may ask you why you want the loan, and let you know about any restrictions.
Why is this important? It can make life simpler. You could, for instance, consolidate credit card debt, cover a home maintenance expense, or move across the country, all with the same loan.
3. Personal loans are installment loans
Installment loans require regular payments (usually monthly) until the balance is zero.
Why is this important? Unlike credit cards, you know exactly when your debt will be clear (as long as you make your payments on time). That can help with long-term financial planning.
4. Personal loan interest rates are usually fixed
Most personal loans come with interest rates and payments that don't change during the life of the loan.
Why is this important? Fixed personal loan interest rates and payments that don't change can make budgeting easier and could protect you from rising interest rates. For context, the average rate on a 24-month personal loan at commercial banks is roughly 12.44% as of October 2026.
5. Personal loan lenders offer a variety of terms
Most lenders offer repayment terms between two and seven years, and some lenders may offer shorter or longer terms.
Why is this important? You could choose a term that allows you to borrow what you need at a payment you can afford.
6. You may be able to borrow with a co-signer
Many personal loan providers allow co-signers. A co-signer shares responsibility for repaying the loan.
Why is this important? Having a qualified co-signer on your personal loan could improve your chances of getting a loan or getting more favorable terms, or could help you qualify for more than you could borrow on your own.
7. Personal loans can be refinanced
You could refinance a personal loan. That means you could take out a new loan and use it to pay off the old one. People consider refinancing when they are likely to qualify for a new loan with better terms than the old one.
Why is this important? Refinancing could allow you to take advantage of lower interest rates or get better loan terms. That may help you save on interest charges or get a lower monthly payment. Consider any loan fees that may eat into your savings.
8. Personal loans can be funded quickly
Once approved, most lenders can send your funds within a few days. For example, Achieve Personal Loans can fund as soon as the next business day. Some lenders may even offer same-day funding in some cases.
Why is this important? Fast funding helps people avoid expensive options like payday loans or title loans when they need money right away.
9. You can prequalify for a personal loan
You don't have to fully apply for a personal loan to find out whether you can get one. Many lenders allow you to prequalify with a soft credit check before formally applying.
Why is this important? Prequalification with a soft inquiry allows you to explore your options and find out what you might qualify for without risking your credit score.
10. Personal loans might help improve your credit score
Most personal loan providers report their loans to at least one credit bureau.
Why is this important? First, paying your loan on time helps you build a strong payment history, and that's the factor that influences your credit score the most.
Second, part of your credit score is based on your credit mix—whether you have experience with different kinds of credit accounts. If your borrowing is mainly on credit cards, adding an installment loan (like a personal loan) could help you improve your score.
Third, you could use a personal loan to consolidate credit card debt and pay down those card balances. Utilization compares your credit card balances to your cards' credit limits, so paying down that revolving debt could reduce your utilization rate. Utilization is an important factor in credit scoring.
Achieve is not a Credit Repair Organization and does not provide, or offer, services or advice to repair, modify, or improve your credit.
Personal loan requirements: How to borrow without getting burned
What lenders look for in a personal loan application
Personal loans are available to a wide range of borrowers, including those with fair credit. Lenders review a few key areas to decide whether you're eligible to apply and what terms they can offer.
Credit history and score: Lenders check your credit reports and credit scores to see how you've handled credit in the past.
Income and employment: Lenders confirm you have a steady income to comfortably repay the loan.
Debt-to-income ratio (DTI): DTI compares your monthly debt payments and housing costs to your gross (pre-tax) monthly income. A lower DTI leaves more room in your budget for a new payment.
You can strengthen your application with a few practical steps. Check your credit reports for errors and dispute any you find. Pay down your credit card balances before you apply. Gather recent income documents, like pay stubs or tax returns, so you can complete the application accurately.
You can prequalify through Achieve Personal Loans to see your options. Achieve uses a soft credit check that doesn't affect your credit score. Final terms depend on full underwriting and may differ from the estimate.
Find out if you qualify through Achieve Personal Loans.
Author Information
Written by
Gina Freeman has been covering personal finance topics for over 20 years. She loves helping consumers understand tough topics and make confident decisions. Her professional history includes mortgage lending, credit scoring, taxes, and bankruptcy. Gina has a BS in financial management from the University of Nevada.
Reviewed by
Dana is an Achieve writer. She has been covering breaking financial news for nearly 30 years and is most interested in how financial news impacts everyday people. Dana is a personal loan, insurance, and brokerage expert for The Motley Fool.
Frequently asked questions about applying for a personal loan
Personal loans and credit cards each fit different needs. An unsecured personal loan can offer a fixed monthly payment and a set payoff date, which makes a large, one-time expense easier to budget for. A credit card offers revolving credit you can reuse, which suits smaller, ongoing purchases you pay off quickly.
For consolidating higher-interest balances, a personal loan is often less expensive than credit cards because it typically carries a fixed rate, and that rate is often lower than credit cards charge. Choose the one that matches how you plan to borrow and repay.
Your monthly personal loan payment generally depends how much you borrow, your interest rate, and the term length.
A larger loan amount or a higher interest rate raises the payment. A longer term lowers the monthly payment. A longer term also adds more total interest over the life of the loan. Before you accept an offer, the lender should show you the exact rate, term, and monthly payment.
A personal loan could be a good idea if you want to consolidate higher-interest debt or cover an important planned expense you can repay on a fixed schedule. The fixed payment and set payoff date make your costs predictable.
A personal loan is less suited to ongoing expenses or splurge purchases outside your means.
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