Personal Loan
An unsecured installment loan repaid in fixed monthly payments at a fixed or variable rate over a set term.
What is Personal Loan?
A personal loan is an unsecured installment loan issued by a bank, credit union, or online lender that provides a lump sum upfront, repaid over a fixed term in equal monthly installments. Because personal loans are unsecured — backed by creditworthiness rather than collateral — interest rates are higher than secured loans like mortgages. They are commonly used for debt consolidation, home improvement, medical expenses, or major purchases.
Example
A borrower with a 720 credit score takes a $15,000 personal loan at 9.5% APR for 36 months to consolidate high-interest credit card debt, reducing their effective rate from 22% to 9.5%. The fixed monthly payment of $482 eliminates the variable minimum-payment trap of revolving credit.
Source: CFPB — Personal Loans