The Bottom Line
SoFi offers the best all-around blend of good things to look for in a personal loan, like low rates, quick funding timelines, and high customer satisfaction scores. Navy Federal Credit Union is our go-to recommendation for military members due to its especially customer-friendly policies and outstanding reputation. Discover, PenFed Credit Union, and Lake Michigan Credit Union round out the top options for the lowest-cost loans available today.
What Is a Personal Loan and How Does It Work?
An unsecured personal loan is a general-purpose installment loan. Unlike auto loans or mortgages, a personal loan can be used for just about anything. A personal loan is paid out in one lump sum after your application is approved, typically via a bank deposit or a check mailed to your address. Once your personal loan funds are disbursed, you’ll make the same fixed monthly payment for the life of the loan, usually a few years in length.
Use our personal loan calculator to zero in on a loan amount and term that fits your credit, your financial history, and your budget. You can see how long it’ll take you to pay down your loan—and your loan’s total cost—with different amounts, rates, and credit levels.
Most personal loans are unsecured, which means they’re not backed by collateral. If you have assets such as a car or cash savings, some lenders allow you to pledge them toward a secured personal loan in order to get lower rates or a better chance at approval. If you default, your lender can claim ownership of your collateral to repay your debt.
Personal loans may be solo, or you can have a co-signer or a co-borrower on your loan. A co-borrower is often someone such as a spouse or partner who agrees to share responsibility with you for paying off the loan from the start. A co-signer, on the other hand, only agrees to repay the loan if you default, giving the lender more peace of mind—which can sway them into approving your application.
Who Has the Lowest Personal Loan Interest Rates?
Among the the 70 lenders we evaluated to create this list, American Express offers the lowest advertised rate, currently 5.91%. But not everyone is eligible for that rate. For one thing, American Express only lends to existing customers that it invites to apply. For another, the lowest advertised rates are only offered to borrowers with the strongest credit profiles (high credit scores, low debt-to-income ratios), and generally for loans with shorter terms.
This means that lenders will offer most borrowers a rate other than the lowest advertised one. And for some borrowers, that might be a rate closer to the advertised maximum.
The average rate in the chart below is the average rate offered by 19 of our lender partners to borrowers who submit applications through their systems. It includes loan offers made to people with the strongest credit profiles and to those with the weakest.
The rate you might be offered may be better or worse than the average (hopefully it’s better), but ultimately that will depend on the strength of your credit profile.
Where to Get a Personal Loan
You’ll find personal loans in most places where you already do your banking. Different types of lenders may offer personal loans with contrasting features or benefits.
- Banks: Personal loans aren’t the main attraction at most banks, although most do offer them. Banks tend to charge a higher interest rate on a personal loan and usually have stricter credit score requirements.
- Credit unions: You’ll need to meet membership requirements to join, but once in, credit unions are generally more flexible than banks in offering affordable personal loans to members.
- Online lenders: You can find many more online lenders than local credit unions and banks, expanding your options significantly. Online lenders generally have the easiest-to-meet personal loan requirements of all.
Note that some banks offer lower rates than many credit unions do, for example, and some online lenders may be pickier about your credit score than other lenders.
Reasons to Apply For a Personal Loan
One of the reasons why personal loans are so popular is because they can be used for just about anything. People commonly use personal loans to pay for:
- Surprise emergency expenses
- Veterinary or medical bills
- Consolidating higher-interest debt
- Taking a vacation or getting married
- Home improvement projects and repairs
Most lenders don’t allow personal loans to be used for college tuition, business expenses, gambling, house down payments, or illegal activities.
Debt consolidation is the most popular reason for getting a personal loan, according to Investopedia’s 2023 Personal Loan Borrower Survey. Home improvements and large purchases were the next two most common reasons cited for seeking a loan. The best debt consolidation loans are ones with low interest rates and flexible repayment terms.
Pros and Cons of Personal Loans
As with any financial tool, it’s important to weigh the benefits against the drawbacks if you’re looking to borrow money.
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Quick funding times
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Predictable monthly payments
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Cheaper than using credit cards
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Use for a wide range of expenses
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Builds credit with on-time payments
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Unsecured loans are more expensive than secured loans
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Harms credit if you miss payments or default
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May lose collateral if you default on secured loan
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Requires good to excellent credit for the best rates
Tips for Picking the Best Personal Loan for You
When you’re shopping for a loan, here are some of the factors you should evaluate:
- Interest rates: This is the biggest expense associated with a loan, so it should be at the top of your comparison list. Look for a lender’s annual percentage rate (APR), which includes fees (like origination fees) and your personal loan’s interest, so you’re comparing apples to apples.
- Origination fees: Some lenders charge an origination fee to open the loan. Usually, this cost is subtracted from the total amount borrowed, so be sure you account for that in your planning.
- Loan amounts and term lengths: Some lenders may not offer loans in the amounts and repayment times you want or need.
- Prepayment penalties: These are fees the lender charges if you pay off the debt before the end of the term. These are rare with personal loans (none of the 70 lenders in our database charge them), but it’s worth looking out for.
- Minimum credit score and income requirements: Not all lenders share their qualification requirements upfront, but many do. If your credit is lower or your income is, you may have a difficult time securing a loan you can afford.
- Option to use a co-signer or co-borrower: Many lenders allow you to apply with a co-signer or co-borrower, which can help you qualify.
- Option to use collateral: Personal loans are generally unsecured, which means they don’t require collateral. Some lenders do offer secured personal loans (with cars, CD or savings accounts, or even your home’s fixtures as collateral). This can make it easier to qualify and often results in lower APRs.
- Direct payment to old creditors: For debt consolidation loans, many lenders will pay your creditors directly. This is convenient for you and offers a bit of risk reduction for the bank.
- Loan use restrictions: Make sure the lender you are interested in borrowing from doesn’t have restrictions against how you intend to use the funds. Nearly all lenders prohibit using personal loans for gambling or investing, school expenses like tuition, or business funding. Some may have tighter restrictions.
- Customer reviews and ratings: Finally, read a few reviews of potential lenders on financial product and service educational sites, as well as customer experience sites like Trustpilot to get as broad a view as possible.
How to Qualify For a Personal Loan
Personal loans are usually easy to qualify for, although it can be hard to get a loan with bad credit, and some borrowers face difficulties in getting approved. Each lender has specific requirements you’ll need to meet, but in general, your chances of qualifying with any given lender increase if you have good to excellent credit, a consistently high income, and low existing debt payments. A healthy debt-to-income ratio will improve your odds of approval and getting a better rate. It may be easier to qualify for smaller loan amounts with shorter term lengths as well.
Average APR by Credit Score
How to Apply for a Personal Loan, Step-by-Step
Most lenders allow you to apply for a personal loan online, although you may be able to apply in person or over the phone, especially if you’re dealing with a bank or credit union.
- Get pre-qualified: The personal loan application process usually starts by getting pre-qualified. You’ll provide a few basic details about yourself, such as your name, contact information, income, and Social Security number, to your potential lender. Most lenders offer pre-qualification, but not all. Pre-qualification doesn’t usually involve a hard credit check, so you won’t have to worry about too many credit inquiries hurting your credit score.
- Review options: The lender will do a soft credit check, which won’t affect your credit score. If the lender deems you likely to be approved, they’ll respond with a personal loan offer outlining your options, interest rates, and loan costs. You can use this to compare rates and terms and other features among several lenders.
- Complete an application: Once you find the best personal loan option, you’ll complete a full loan application with that lender. You’ll typically need to provide copies of documents proving your identity (government-issued identity photo I.D.), income (recent pay stubs, tax returns, or W-2s), and finances (recent bank statements). At this stage the lender will perform a hard credit check.
- Receive funds: If you’re approved, your lender will disburse your loan funds to your bank account or by check, depending on its policies.
Alternatives to Personal Loans
Personal loans are not your only option if you need a flexible way to borrow money. Depending on your circumstances, here are a few other good options to consider:
- 401(k) loan: Not an option to consider lightly, but in some circumstances, taking a loan from your 401(k) retirement account can be a cost-effective way to borrow.
- Crowdfunding: If you need to borrow money for a compelling and share-worthy reason, you may be able to raise the funds on a crowdfunding platform with no debt needed.
- Grants or charity: Many government and nonprofit programs offer assistance for things you’d use a personal loan for, like catching up on home repairs. If you need help finding options, 211.org offers free personal assistance.
- 0% APR credit card: If you can qualify for a 0% APR credit card, you may be able to make a big purchase or transfer existing credit card debt with a long runway to pay it off.
- Personal line of credit: Some banks and credit unions offer personal lines of credit that you can draw against as needed, a particularly good option if you need frequent small loans.
- Loans from family or friends: Ask around your social support network if someone would be willing to lend you money in exchange for writing a promissory note or loan agreement with interest.
- Home equity loan or HELOCs: Homeowners with at least 20% equity in their home may be able to use a home equity loan or line of credit to borrow money, a particularly good option for home improvements and repairs.
Watch out for deferred-interest store credit cards or financing offers, which are marketed similarly to true 0% APR credit cards at many retailers. The fine print reveals that you’ll need to pay off the card or amount financed in full by the end of the interest-free period; otherwise, all of those interest charges will be added back to your account.
Frequently Asked Questions
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U.S. Bank offers the best personal loans among big banks, according to our research. It features affordable rates with no origination fees and is available to roughly half of U.S. states. If you’re willing to work with an online lender, SoFi is our best all-around choice, featuring similar rates to U.S. Bank but offering an additional benefits package with free access to financial advisors and career counseling, among other benefits.
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If you don’t have good credit or a strong income on your own, it may be easier to get approved if you have a creditworthy co-signer or co-borrower. Some lenders also allow you to use collateral for a better shot at qualifying for a loan or receiving lower rates.
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The average personal loan borrower had a credit score of 685 during the final quarter of 2022. This can vary quite a bit, though; some lenders, such as Upstart, have no minimum credit score requirement. Others, require a credit score over 700. Banks and credit unions tend to have higher credit score requirements, while fintech lenders generally accept lower credit scores.
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Some lenders, such as SoFi, offer personal loans up to $100,000. However, that doesn’t mean you’ll necessarily qualify for that much. Each lender assesses your financial situation—including your monthly income and debt payments—when deciding the maximum loan amount you can borrow after you submit a loan application.
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A personal loan from a bank or other lender is not considered income by the IRS, and is not taxable. However, if you were run into financial trouble and worked out an agreement with your lender to forgive the loan, the amount forgiven would be considered income, and would be taxable. In some cases the lender might send you a form (1099-C, Cancellation of Debt), which will note the amount you must report on your tax return. Regardless if your lender sends you the form, you must report the forgiven debt as income on your return.
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The monthly cost of a personal loan, of whatever amount, will depend on the loan amount, the loan term (or the number of monthly payments), and the interest rate. The easiest way to calculate a monthly payment is to use a personal loan calculator. A $5,000 loan, paid over 24 months (or two years), with an interest rate of 12.17% (the current average charged on two-year personal loans) would result in a monthly payment of $235.76.
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According to Investopedia’s research, SoFi offers the best personal loans when you consider rates, fees, amounts and term, and additional factors like customer experience. Some lenders offer loans for lower interest rates or accept borrowers with weaker credit profiles or offer longer terms. But overall, we rate SoFi the highest.
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According to our research, SoFi is the best overall personal loan lender based on it’s combination of competitive rates, large loan amounts, and wide range of repayment terms. Where it really shines is with customer service and experience, offering a bevy helpful services to its customers, from a well-regarded mobile app to financial hardship assistance.
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We researched and reviewed 70 lenders to find the 10 lenders you see above on this list. While we write individual reviews for most companies, we do not always write reviews for companies we would not recommend. Below are the companies we researched along with links to individual company reviews to help you learn more before making a decision:
Achieve, Affinity Federal Credit Union, Alliant Credit Union, American Express, Avant, Axos Bank, Bankers Healthcare Group, Best Egg, Bethpage Federal Credit Union, Blue Federal Credit Union, Boatloan.com, Boeing Employees’ Credit Union, CapexMD, Citibank, Connexus Credit Union, Discover, Dividend Finance, ENT Credit Union, Fig Loans, First Tech Federal Credit Union, Future Family, GoodLeap, Greenstate Credit Union, Happy Money, Hiway Credit Union, Lake Michigan Credit Union, Laurel Road, LendingClub, LendingPoint, LendingUSA, Liberty Federal Credit Union, LightStream, Lyon Financial, Mariner, Money Key, Mountain America Credit Union, NASA Federal Credit Union, Navy Federal Credit Union, Netcredit, Old National Bank, OneMain Financial, OppLoans, Patelco Credit Union, PenFed, Personify Financial, PNC Bank, Prosper, Reach Financial, Regions, Reprise, Rocket Loans, Santander, Service Federal Credit Union, SoFi, Southeast Financial, Summit Credit Union, SunPower, TD Bank, Teachers Federal Credit Union, Trident Funding, Truist, U.S. Bank, Universal Credit, Upgrade, Upstart, USAA, Vantage Recreational Finance, Wells Fargo.
How We Picked the Best Personal Loans
To evaluate and rank personal loan providers we collected hundreds of data points across 70 lenders, including traditional banks, credit unions, fintechs, and special interest finance companies. We researched and evaluated APRs, loan amounts and terms, fees, customer experience, and much more. To rank the lenders in our database and to generate star ratings, we weighted the data we collected, based in part on what consumers told us were the most important features of a personal loan and lender in a survey we conducted. We grouped those factors into four broad areas:
- Loan costs (advertised APR, fees, and six other factors): 29.25%
- Loan terms (loan amount, repayment term, and three other factors): 22.25%
- Borrowing requirements (credit score, membership requirement, and six other factors): 28.5%
- Additional features (online application, pre-qualification, and eight other factors): 20%
Learn more about how we evaluated personal loans in our complete methodology.
Guide to Personal Loans
Learn more about personal loans: