Personal loans make it easy to borrow money for home renovations, dental procedures, or moving costs. But there are hundreds of banks, credit unions, and online lenders that offer personal loans, so how can you be sure to choose the right one?
While the loan’s annual percentage rate (APR) affects the overall cost of your loan, it’s not the only factor to consider. When shopping for a personal loan, eligibility requirements, repayment options, and fees are all important variables to keep in mind.
As you shop for a personal loan, get rate quotes from multiple lenders if possible. Many lenders allow you to prequalify for a loan, meaning you can check your eligibility and potential rates without affecting your credit score. As you review your personal loan options, compare the following factors:
The amount of money you want to borrow will affect which lenders are a good fit. With most personal loan lenders, the most you can borrow is $50,000 or less. If you’re consolidating credit card debt or financing an upcoming move, that amount may be more than enough. But for larger expenses, such as installing a swimming pool or renovating your kitchen, you may need a larger loan.
There are lenders with higher loan maximums; companies such as Alliant Credit Union and SoFi allow you to borrow up to $100,000. However, you typically need to meet more stringent eligibility requirements to borrow a loan of this size.
Learn more: How much can I borrow with a personal loan?
Personal loans are repaid with fixed monthly payments over a predetermined period. For most personal loans, the repayment term typically ranges from one to five years. However, some lenders offer longer loan terms of seven years or more.
A longer loan term comes with a smaller monthly payment, so if you have an expensive home repair or medical expense, it can be a helpful option. But keep in mind that a longer loan term also means you’ll pay more in interest over the life of the loan.
Learn more: How to choose the right personal loan term length
Some lenders charge origination fees, which are typically deducted from the loan amount prior to its disbursement. For example, if you take out a $10,000 loan from a lender with a 5% origination fee, you’d only receive $9,500 in loan funds — the lender would deduct the $500 fee before sending you the cash.
Origination fees vary by lender, but they can range from 0% to 10%. Typically, lenders that specialize in loans for those with poor to fair credit charge higher origination fees, while lenders that cater to those with excellent credit may not charge origination fees at all.
One of the primary benefits of a personal loan is the flexibility it provides. There are few restrictions on how you can use the loan funds.
However, there are some key exceptions. Many lenders prohibit the use of personal loans for education-related expenses, such as college tuition and student loan repayment, or for business purposes. Review each lender’s list of prohibited personal loan uses to ensure you’re in compliance with the loan agreement.
Learn more: What can I use a personal loan for? 7 common reasons to borrow.
If you have an unexpected expense, such as a car repair or a broken appliance, you need a personal loan fast. Some lenders can take several days to review and process loan applications and disburse loan funds, while others are much faster. With some lenders, such as LightStream, you can receive the loan funds as soon as the same day you apply.
Each personal loan lender sets its own eligibility requirements, with different minimums for the following factors:
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Credit score: For most personal loans, you need at least fair credit to qualify. However, some lenders accept credit scores as low as 550.
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Income: You usually need a reliable source of income, such as a regular job, Social Security benefits, or pension payments. You also must provide proof of income with your application, including recent pay stubs or tax returns.
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Debt-to-income ratio (DTI): Your DTI is a measure of how much of your monthly income goes toward debt payments. To ensure you can afford your loan payments, personal loan lenders usually look for a DTI under 50%, though under 35% will result in better interest rates and approval odds.
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Co-borrower or co-signer: If you have less-than-stellar credit or insufficient income, you could still qualify for a loan by adding a co-borrower or co-signer to your application. Some personal loan lenders allow co-borrowers, and they can help you borrow more money or qualify for lower rates on a loan.
When you take out a loan, you want a lender that you know will answer your questions promptly and handle your account efficiently. Check lender reviews for red flags using resources like TrustPilot, the Better Business Bureau, or the Consumer Financial Protection Bureau’s consumer complaint database.
You can read real customer experiences and get an idea of what to expect from a specific lender.
As you research your personal loan options and compare terms, consider the seven variables — loan amounts, repayment terms, fees, permitted uses, funding speed, eligibility requirements, and customer satisfaction — as a scorecard. Considering how a lender performs in each category will help you choose the best loan for your needs.
To get started, check out our picks for the best personal loans.
If a lender offers a prequalification tool, you can answer a few basic questions, and the lender gives you an estimate of potential loan options based on a soft credit check. Loan prequalifications allow you to check your eligibility for a loan and view possible loans without affecting your credit.
Learn more: Personal loan prequalification: Could it help you get a better rate?
While most lenders require you to have at least fair or good credit, you might qualify for a personal loan with a credit score as low as 550. If you have bad credit, other options include applying with a co-borrower or opting for a secured personal loan.
Generally, credit unions tend to offer lower rates than banks, making them potentially less expensive. According to National Credit Union Administration 2025 data, credit unions offered three-year personal loans with an average APR of 10.74%. By contrast, banks offered an average APR of 12.02%.
Learn more: What’s the best place to get a personal loan?
This article was edited by Alicia Hahn.
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