Log in Log in Log in Apply now

What is a personal loan?


Illustration of a clipboard, calendar, calculator, and envelope with cash

Sometimes you need to pay for an unexpected event, like a leaky roof, car repair, or medical bill. If you don’t have enough money set aside, these situations can be stressful. Fortunately, if you need fast cash, you can apply for a personal loan. These loans give you access to money that you can use for a variety of personal expenses.

Key takeaways

  • A personal loan is an amount of money that you borrow for personal expenses. The money can be used for home repairs, medical bills, large purchases, and other household expenses.
  • A lender will typically look at your credit score and debt-to-income ratio to determine how large a loan you qualify for.
  • As a general rule: The higher your credit score, the lower your interest rate.
  • When you take out a personal loan, you’re responsible for paying back the loan over time in regular, timely payments.


If you’re in need of a personal loan, you’ve come to the right place.

Here’s what we’re going to cover:

  • What is a personal loan?
  • How does a personal loan work?
  • What can a personal loan be used for?
  • What are the different types of personal loans?
  • How do I apply for a personal loan?
  • How do I get approved for a personal loan?
  • How to take control of your finances with a personal loan from Oportun

What is a personal loan?

Put simply, a personal loan is an amount of money that you borrow for personal expenses. It’s a type of installment loan that you pay back over time in set payments. You can apply for a personal loan from banks, credit unions, and state-licensed lenders.

Each lender has its own eligibility requirements and rates. So make sure to do your research and choose a lender that’s right for you.

How does a personal loan work?

Once you receive your personal loan, you start paying it back in regular installments until it is fully paid off.

Personal loans typically come with fixed interest rates, repayment terms, and payments. Here’s what that means for you.

Fixed APR

According to Experian, the average annual percentage rate (APR) on a personal loan from a bank or licensed lender is between 6­–36 percent. This is the money you’ll pay for taking out the loan. The APR is made up of the interest and fees on your loan. But what does that mean?

Interest is a percentage of the total loan amount that you pay just for taking out the money.

Fees are a part of the APR can include loan origination fees and processing fees. Additionally, not all lenders charge the same fees.

The APR for a personal loan is better than what you’d get with other quick cash loans. For instance, when comparing a payday loan with a traditional personal loan, personal loans are more affordable in the long run.

Fixed repayment term

Your personal loan comes with a fixed term. This is the amount of time you have to pay off your loan. Most traditional personal loans have terms between 12 months and seven years. Your lender can’t alter this schedule once you’ve received your loan. As a result, you’ll enjoy predictable timely payments that can help you plan your budget with ease.

What can a personal loan be used for?

Personal loans can be used for a wide range of household expenses. Some common uses include:

  • Unexpected expenses and emergencies
    Not everyone has an emergency fund set aside. If you need to pay for an emergency, a personal loan can be a lifesaver. It allows you to pay for your pet’s vet bill, your urgent car repair, or any other unexpected expense.
  • Large purchases
    If you want to make a large purchase, you may be tempted to pay for it with your credit card. If your purchase will take months to pay off, it may be more cost-effective to use a personal loan instead. This way, you can pay for that new washing machine, fixing up the house, or even a family vacation at a lower interest rate.
  • Medical bills
    Even when you have health insurance, your policy doesn’t cover everything. Medical bills can be expensive. A personal loan can help pay your medical bills on time and ensure that your bills don’t end up in collections (which can hurt your credit score). Dental work, specific procedures, and anything else that isn’t covered by your health insurance plan can be paid for with a personal loan.
  • Debt consolidation
    If you have credit card debt, you’re not alone. Over 170 million Americans hold credit cards. Credit card debt can be expensive, especially if you’re locked into a high interest rate. And with variable interest rates and terms, it can be difficult to predict your monthly credit card payments. By paying off these debts with a personal loan, you can bundle your debt into a single, predictable payment plan with the opportunity for a better interest rate.
  • Home improvements and repairs
    If you want to renovate your home or pay for a costly home repair, a personal loan can help make that possible. Even better, unlike home equity loans, traditional personal loans don’t require your home as collateral.
  • Money owed to friends and family
    In tough times, you might borrow money from family or friends. While we all need this kind of support from time to time, it can be uncomfortable. With a personal loan, you can pay them back and ease any tension or stress you feel about the situation.

As you can see, personal loans are useful in many different situations. They’re an effective way to reduce financial stress when the unexpected happens.

What are the different types of personal loans?

There are two types of personal loans; secured and unsecured.

Unsecured personal loans don’t require collateral. In other words, they allow you to borrow money without putting your personal assets on the line. In general, unsecured personal loans are harder to qualify for than secured loans.

In contrast, secured personal loans require collateral. This collateral can be your home, your car, or something else of value that you own. If you fail to make your loan payments on time, your lender can take this collateral and apply it toward your payments. Collateral reduces risk for the lender and gives you an extra incentive to make your payments on time. As a result, a secured loan often has a lower interest rate than an unsecured loan.

How do I apply for a personal loan?

To apply for a personal loan, just follow these steps:

1. Check your credit report

Illustration of the documents you need to apply for an Oportun personal loan that will cover your personal expenses.

Lenders want to know that you can pay back your loan on time. To do this, most lenders start by looking at your credit score. Your credit score is a three-digit number between 300 and 850 that banks use to decide whether or not they think you’ll make your payments on time.

Before you apply for a personal loan, it’s a good idea to request your credit report. This allows you to look over your credit history and make sure there are no errors. If you do notice errors, be sure to let the credit bureau know right away. They’ll help you correct the information, and that could raise your credit score before you apply.

To check your credit report, go to AnnualCreditReport.com. This site allows you to get a credit report for free from each of the major credit bureaus once every 12 months. These national credit bureaus include:

  • Equifax
  • TransUnion
  • Experian

Note: Because of COVID-19, you can request your credit report for free once a week until April 2021.

If you don’t have a credit score, that’s okay. Just make sure to read the last section titled “How to take control of your finances with a personal loan from Oportun.”

2. Do your research

Once you know your credit score, it’s time to find the right lender. Compare lenders online and look for ones that offer:

  • Low interest rates
  • Minimal origination fees
  • No prepayment penalties
  • Flexible loan payment schedules
  • Affordable payment plans
  • Great customer service

To get a customized loan offer from each lender, start by filling out their online prequalification application. If you prequalify, you should see your offer within minutes. Comparing these offers can help you decide which lender offers you the best deal.

3. Apply to the lender of your choice

Once you’ve found the right lender, it’s time to submit your loan application and wait to see if you’re approved.

After your application is approved, there’s one last step: review the loan terms and sign the contract. Here are some important things to remember before you sign:

  • Read the fine print
  • Ask any and all questions you have about the loan
  • Ask about automated loan payments

After everything is signed, you should receive your money fairly quickly. Some lenders make your money accessible within a few hours.

How do I get approved for a personal loan?

Lenders want to feel assured that you will pay them back on time. If they can trust you’ll make your payments on time, they’re more likely to approve you.

When reviewing your personal loan application, most lenders consider your:

  • Credit report
  • Bank account activity
  • Payment history
  • Debt-to-income ratio (expenses vs income)
  • Annual income (how much money you make every year)

If you have a good credit score and a low debt-to-income ratio, it’s easier to get approved for a loan and qualify for lower interest rates.

If you don’t have these things, you still have options. You can increase your chances of getting approved by applying for a secured loan or applying with a cosigner who has a high credit score. A cosigner is often a family member who is willing to put their name on a loan application with you.

How to take control of your finances with a personal loan from Oportun

If you’d like to take out a personal loan, we’re here for you. Whether you need to pay an unexpected bill or want to consolidate your debt, a personal loan can help. If you pay back your loan on time, you will boost your credit score and set yourself up for a better financial future.

But what if you have a limited credit history? Or what if you have no credit history at all?

Oportun is here to help. At Oportun, we understand that getting a loan can be challenging. And we believe that everyone deserves the opportunity to improve their finances. That’s why we offer personal loans from $300 to $10,000 with affordable payments. Even if you don’t have a credit history, we’re here for you.

See if you prequalify for a personal loan today.


Experian. What’s a good personal loan interest rate?
Consumer Financial Protection Bureau. CFPB spotlights concerns with medical debt collection and reporting
Consumer Financial Protection Bureau. The consumer credit card market.


The information in this site, including any third-party content and opinions, is for educational purposes only and should not be relied upon as legal, tax, or financial advice or to indicate the availability or suitability of any Oportun product or service to your unique circumstances. Contact your independent financial advisor for advice on your personal situation.

Personal loans through Oportun subject to credit approval. Terms may vary by applicant and state and are subject to change. If you refinance, you may pay interest over a longer period of time or at a higher rate and the overall cost of your loan may be higher. Loans in CA, ID, MO, NM and WI are originated by Oportun, Inc. California loans made pursuant to a California Financing Law license. NV loans originated by Oportun, LLC. In AL, AK, AR, AZ, DE, FL, GA, HI, IL, IN, KS, KY, LA, MI, MN, MS, MT, NC, ND, NE, NH, NJ, OH, OK, OR, PA, RI, SC, SD, TN, TX, UT, VA, VT, WA and WY loans are originated by Pathward®, N.A.. Terms, conditions, and state restrictions apply.

Ready to build a better future? Apply now.

Personal loans

You might also like

How to budget money on a low income What is investing? Tips and tricks for paying off credit card debt Six ways to raise your credit score We’re proud to reveal the new Oportun How to save money during your 20s Do I have too much debt? What is an installment loan? What is an interest rate?

Ready to build a better future? Apply now.

Personal loans Credit cards

We use cookies to bring you the best experience on our site. We never sell your information to third parties. When you use our site, you agree to our cookies policy. Find out more.