Best Personal Loans of December 2023

What is a personal loan?

A personal loan is money borrowed from a bank, a credit union or an online lender that you repay in equal monthly installments, usually over two to seven years.

Personal loans are typically unsecured, which means they don’t require collateral. Lenders instead consider your credit profile, income and debts during the loan approval process. If you fail to repay the loan, your credit can take a hit.

» MORE: Requirements for a personal loan

How do personal loans work?

Within a few days after you’re approved for a personal loan, a lender will deposit the funds, minus any origination fee, in a lump sum into your bank account. Once you have the money, you can use it for nearly any purpose.

Repayment typically starts 30 days after receiving the money. You can pay the fixed monthly amount directly, or some lenders let you set up auto-pay from your bank account. The monthly payments continue until the loan term ends, or earlier if you make additional payments toward your loan. The personal loan is over once you have paid it off in full.

» MORE: How do personal loans affect credit?

When should I get a personal loan?

A NerdWallet survey published in October 2023 revealed that nearly 29% of Americans took out a personal loan within the past 12 months, borrowing on average $6,299.

Getting a personal loan makes the most sense when:

• It’s the least expensive form of financing.

• It’s used to potentially increase your financial standing, like debt consolidation or home improvements.

• You can manage the monthly payments without stressing your budget.

Reasons to get a personal loan

Personal loans can be used for almost any purpose. Some common reasons borrowers get a loan include:

• Debt consolidation.

• Home improvement.

• Major life events.

• Medical expenses.

• Unexpected expenses.

Using a personal loan for a wedding or discretionary expenses like a vacation can be expensive. NerdWallet recommends using savings for nonessentials to avoid finance charges.

If you're borrowing for emergency or medical expenses, consider less-expensive alternatives, such as community assistance or payment plans.

Personal loan interest rates and fees

Personal loan interest rates vary by lender, and the rate you receive depends on factors like your credit score, income and debt-to-income ratio. Here’s what interest rates on personal loans look like, on average:

» MORE: Current average personal loan interest rates

Some lenders charge origination fees to cover the cost of processing the loan. Lenders deduct the fee from the loan proceeds or roll it into the balance. This one-time upfront fee is included in the loan’s annual percentage rate, so consider this when comparing costs between lenders.

Other fees to watch out for include late fees and an insufficient funds fee, which is when you don’t have enough in your bank account to make the loan’s monthly payment.

Pros and cons of personal loans

Depending on your financial situation and the loan’s purpose, a personal loan can be the right move or one you should sidestep.

Pros

Lower starting APRs than credit cards. For consumers with strong credit, personal loans typically have lower APRs than credit cards. While some credit cards offer 0% interest during an introductory period, the rates are generally higher after the period ends.

» MORE: Personal loans vs. credit cards: what’s the difference?

Fixed rates and monthly payments. Personal loans have fixed rates and monthly payments over a set term, so you always know what you owe and for how long. Other financing options like home equity lines of credit have variable rates that can mean fluctuating monthly payments.

Flexible loan amounts. Depending on the lender and your creditworthiness, you may have access to personal loan amounts of $1,000 to $100,000. This range meets a wide variety of expenses, from small emergencies to large home improvement projects.

No collateral. Unlike home equity loans that require you to secure the loan with your house, unsecured personal loans don’t require collateral. You risk damaging your credit if you can’t repay, but you won't lose any assets.

Cons

Maximum APRs can be high. If you have a low credit score, APRs on personal loans can be higher than credit card APRs.

Possible fees. Borrowers may have to pay fees — like origination or late fees — along with their loan payments.

Increase in debt. Taking a personal loan adds debt to your budget, so it's important to factor in the additional obligation and feel comfortable about paying it off.

Summary of personal loan pros and cons

Best place to get a personal loan

You can get a personal loan from online lenders, banks and credit unions. The best option depends on where you can get the rate, terms and features that fit your financial situation.

For example, if a fast and convenient loan application is important to you, then consider an online lender. On the other hand, if lower rates and in-person support matter, then a bank loan or credit union loan could be the better option.

» MORE: Where to get a personal loan

How to choose the best personal loan

Here are things to consider as you shop around and compare personal loans.

Soft credit check. Most online lenders let you check your estimated interest rate by performing a soft check of your credit during pre-qualification. This won’t affect your credit score, so it pays to take steps to pre-qualify for a loan with multiple lenders and compare rates and loan features.

Annual percentage rates. Because APRs include interest rates and fees, they offer an apples-to-apples cost comparison for borrowers deciding between personal loan offers. Use our personal loan calculator to see monthly payments and total costs on personal loans.

Funding time. The time it takes to get a personal loan can depend on the type of lender. Many online lenders will approve your application and send funds the same or next day after you apply. Banks and credit unions may take up to a week.

Repayment terms. Having a wide variety of repayment term options gives you the option to get a shorter term and pay less interest or a longer term and have a low monthly payment. Based on your budget, one may make more financial sense than the other.

Loan amount. Depending on how much money you need, one lender could be more attractive than another. Some lenders offer small to midsize loan amounts, like $2,000 to $50,000, while others provide loans up to $100,000. Determining the amount you need will help you compare and decide.

Special features. See if the lender you’re considering offers any perks that could help you reach your financial goals. You may benefit from features like autopay rate discounts, unemployment protection or financial coaching.

» MORE: Personal loan features to compare

How to get a personal loan

1. Review your credit. Your credit score is a primary factor in whether you qualify for a personal loan and the rate you receive. Resolve any errors that might be hurting your score and, if you can, pay down debts to reduce your DTI ratio. Get a free credit report with NerdWallet or at AnnualCreditReport.com.

2. Pre-qualify with multiple lenders. Pre-qualifying gives you an idea of the rate and terms you can expect. Compare pre-qualified offers to find the lowest APR and monthly payments that fit your budget.

3. Apply. The formal application process requires documents to verify your identity and income. Once approved, you’ll typically receive your loan funds within a week.

» MORE: How to get a personal loan

Next step: Pre-qualify for a personal loan

You can pre-qualify on NerdWallet and see rates from lenders that partner with us. Pre-qualifying triggers a soft credit check, which doesn't impact your score.

Explore personal loans and lenders in each of these categories: