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Borrowing money is not a “one-size-fits-all” experience. There are many types of personal loans geared to fit different borrowers and needs.
The type of loan that works best for you depends on factors like your credit score, desired loan amount, reason for borrowing and how much time you need to repay the loan.
Learn about multiple types of personal loans and when it’s best to use each one.
» COMPARE Best personal loans
1. Unsecured personal loans
Most personal loans are unsecured, meaning they aren’t backed by collateral, such as your home or car. This makes them riskier for lenders, which may mean they charge a slightly higher annual percentage rate, or APR, than with a secured personal loan.
The APR is your total cost of borrowing and includes the interest rate and any origination fees, which are taken out of the loan proceeds.
Lenders review your credit score, income and other debts to determine whether to approve you for an unsecured personal loan and at what APR. Rates are typically from 7% to 36%, and repayment terms range from two to seven years.
When it’s best: An unsecured personal loan is best for large, one-time expenses that help you reach your financial goals, like financing a cross-country move to pursue a job with a much higher salary. Look for a loan with a low APR and monthly payments that fit your budget.
» COMPARE: Best unsecured personal loans
2. Secured personal loans
Secured loans are backed by collateral, which the lender can take and use to recoup its losses if you don't repay the loan.
Online lenders that offer secured personal loans usually let you use a vehicle you own as collateral. Some banks and credit unions let borrowers secure a personal loan with a savings account or another asset.
Secured loan rates are typically lower than unsecured loan rates, because secured loans are considered less risky for lenders.
When it’s best: A secured loan may be a good idea if adding collateral lets you borrow more money or get a lower rate. Weigh the benefits against the potential risk of losing your collateral.
» COMPARE: Best secured personal loans
3. Debt consolidation loans
A debt consolidation loan rolls multiple unsecured debts — such as credit cards, medical bills and other high-interest loans — into one new loan, leaving you with a single monthly payment. Some lenders send loan funds directly to your creditors, saving you that step in the debt consolidation process.
When it’s best: A debt consolidation loan is best if the loan carries a lower APR than the rates on your existing debts. This will save you money on interest and help you pay off the debt faster.
» COMPARE: Best debt consolidation loans
Personal loans from our partners
SoFi 
APR
8.74-35.49%
Loan Amount
$5K-$100K
LightStream 
APR
6.49-24.89%
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$5K-$100K
Best Egg 
APR
6.99-35.99%
Loan Amount
$2K-$50K
4. Co-signed and joint loans
Applying for a personal loan with a co-signer or co-borrower who has a strong credit profile can improve your chances of qualifying. It may also get you a lower rate or more favorable loan terms.
Here’s the difference between a co-signed loan and a joint loan with a co-borrower:
- A co-signer promises to repay the loan if the borrower doesn't, but that person doesn’t have access to the loan funds.
- A co-borrower on a joint loan shares responsibility for repayment and can access the funds.
Missed loan payments will negatively impact credit scores for both you and your co-signer or co-borrower.
Joint personal loans tend to be more common than co-signed personal loans. Of the nearly 30 lenders NerdWallet reviews annually, only three offer co-sign loan options, while 13 offer joint loans.
When it’s best: Co-signed and joint loans are best for borrowers who can’t qualify for a personal loan on their own or who want a lower rate.
» COMPARE: Best co-signed or joint personal loans
🤓 Nerdy Tip
There may be instances when more than one personal loan type can overlap. For example, you might add a co-signer on a debt consolidation loan to increase your chances of qualifying. Or you and a spouse may get a joint loan together and use a vehicle you co-own as collateral, in which case the loan would also be a secured loan. 5. Payday alternative loans
Credit union customers can use payday alternative loans (PALs) to borrow up to $2,000 with repayment terms up to 12 months. You must belong to a credit union that offers PALs. Federal credit unions cap rates for PALs at 28%.
When it’s best: If you need to borrow $2,000 or less and don’t qualify for a traditional personal loan, consider a payday alternative loan over a traditional payday loan. The rates are lower and the repayment terms are longer than for a payday loan, making it a more manageable borrowing option.
6. Small-dollar bank loans
Personal loans from banks usually start at $1,000 or higher. However, some banks offer short-term, small-dollar loans to their customers in good standing.
Bank of America’s Balance Assist loan lets customers borrow up to $500 over three months with a flat $5 fee.
U.S. Bank’s Simple Loan allows account holders to borrow up to $1,000 in $100 increments. There’s a $6 fee per $100 borrowed, and the loan must be paid over three monthly installments.
Wells Fargo’s Flex Loan lets customers borrow either $250 with a $12 fee or $500 with a $20 fee. Loan payments stretch out over four months.
When it’s best: If your bank offers one, a small-dollar bank loan can provide a few hundred dollars to bridge a short financial gap. Just make sure you’re able to repay the loan within the allotted time.
7. Personal line of credit
A personal line of credit is revolving credit, typically available at banks. The money is drawn and repaid like with a credit card.
Rather than a personal loan’s lump sum of cash, a credit line gives access to funds you can borrow from as needed — up to your credit limit. As you make payments, you free up the available credit and can borrow more.
Rates for personal lines of credit are typically variable, meaning your rate and your monthly payments can change. This is unlike most personal loans, which have fixed interest rates.
With a personal line of credit, you only pay interest on the money you draw from your credit line, not the entire credit limit.
When it’s best: A personal line of credit works best when you need flexibility in your loan amount or for a large ongoing expense, like a home improvement project.
8. ‘Buy now, pay later’ loans
Many major merchants offer “buy now, pay later” loans, which let you split a purchase into smaller installments. At checkout, you create an account with a BNPL company, pay for part of the purchase and authorize the app to charge you the rest of the balance, usually in biweekly installments.
These companies don’t require good credit to qualify you, but BNPL apps may do a soft credit pull. Many BNPL loans don’t come with interest, but some may.
When it’s best: BNPL is best for necessary, one-time purchases that you wouldn’t otherwise be able to pay for with cash. It can be a good financing option if you’re able to afford the installment payments.
» MORE: Compare BNPL apps
What to consider when choosing a type of personal loan
When deciding what kind of loan to pursue, reflect on the following factors:
Annual percentage rate: The loan with the lowest APR is often the least expensive option. Financial experts believe APRs on affordable personal loans should not exceed 36%.
Payment amount: Make sure you can comfortably afford to make loan payments. If you don’t repay your loan as promised, your credit score can take a hit. You could also lose your collateral, if it is a secured loan.
Use NerdWallet’s personal loan calculator to estimate monthly payments before borrowing.
Loan details
2026
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Your loan estimate
Monthly payment
$212.47
Total principal
$10,000
Total interest payments
$2,748.23
Total loan payments
$12,748.23
Payoff date
02 / 2031
Show amortization schedule
Loan amount: Lenders often have restrictions on loan size. Check the lender’s minimum and maximum loan amount requirements to make sure it fits your borrowing needs.
Repayment term: Do you plan to repay your loan over a few weeks, a few months or a few years? The time you need to repay the loan can strongly influence what type of loan you should get.
Credit score: Having good or excellent credit (a score from the mid-600s and higher) will qualify you for many types of loans. If your credit score is in the low 600s or less, you might want to consider options that are more geared towards borrowers with bad credit, such as a secured loan, a co-signed or joint loan, a payday alternative loan or a BNPL loan.
6 types of loans to avoid
Loans that have high APRs and short repayment terms can be difficult to repay on time. If you can’t make the payments, you could end up borrowing again, which can lead to a cycle of debt.
These loans should be a last resort in an emergency.
1. Cash advance app
Cash advance apps let you borrow small amounts — often less than $1,000 — that you must repay with your upcoming paycheck.
Rather than using credit information to qualify you, most apps require access to your bank account and transaction history to determine how much you can borrow. The apps link to your bank account to automatically withdraw your repayment on your next payday.
Most cash advance apps charge a fast-funding fee and may request an optional tip. Some charge a monthly subscription fee. These fees may be relatively small but can add up.
2. Credit card advance
You can use your credit card to get a short-term cash advance loan from a bank or an ATM. It’s a convenient but expensive way to get cash.
Credit card interest rates tend to be higher for cash advances than for purchases. You also have to pay cash advance fees, which are often a flat dollar amount or a small percentage of the amount borrowed.
3. Pawnshop loan
A pawnshop loan is a secured loan. You temporarily give an item you own, such as jewelry or electronics, to a pawnshop as collateral. In turn, the pawnshop lends you a percentage of your collateral’s resale value.
Pawnshop loans can have rates around 200% and are usually due in about 30 to 90 days. If you don’t repay the loan, the pawnshop can sell your asset. However, defaulting on the loan won’t damage your credit.
4. Payday loans
A payday loan is a type of unsecured loan that’s typically repaid on the borrower’s next payday. Loan amounts tend to be about $500 or less, and APRs can be around 400%.
The short repayment period and high costs may lead borrowers to take out additional loans when they can’t repay the first, trapping them in a cycle of debt.
5. Car title loans
A car title loan is a type of secured loan that uses your vehicle as collateral. If you can’t repay the loan, you could end up losing your car.
You can typically borrow between 25% to 50% of the vehicle’s value. Usually, you’ll need to own your vehicle outright.
Title loans are short-term, usually due within 15 to 30 days, though some lenders let you pay in installments over several months. Lenders charge triple-digit interest rates, making it an expensive way to borrow money.
6. 401(k) loans
A 401(k) loan lets you borrow money from your workplace retirement account. You can typically borrow up 50% of your vested balance or $50,000, whichever is less.
You usually need to repay the loan balance plus interest within five years. If you leave your job, the loan could be due sooner. If you don’t repay a 401(k) loan by the deadline, the IRS treats the outstanding balance as a distribution, which could result in taxes and penalties.
Though 401(k) loans usually have lower interest rates than credit cards and personal loans, a downside is that you can miss out on potential growth of your retirement savings.
Next steps
If you’re ready to move forward with getting a personal loan, pre-qualify through NerdWallet to get offers from our top lending partners within minutes.
Pre-qualifying for a personal loan is free and does not impact your credit score.
Frequently Asked Questions
What can you use a personal loan for?
You can use a personal loan for almost any purpose. The best reason to get a personal loan is to improve your financial situation, like consolidating high-interest debt or tackling a home improvement project that’ll increase the value of your home. Some lenders restrict borrowers from using personal loans in particular instances, such as paying college tuition.
Where can you get a personal loan?
You can get a personal loan from a bank, credit union or online lender. The best offer is usually the one with the lowest interest rate and monthly payments that fit your budget. Pre-qualify with multiple lenders to compare offers.
What do you need to qualify for a personal loan?
Reputable lenders will check your credit, income and existing debt to determine if you qualify for a personal loan. Having good or excellent credit (a score in the mid-600s or higher), a low debt-to-income ratio (ideally not much higher than 40%), a solid income and a stable employment history often gives you the best selection of loan offers.
Methodology
How we chose the best personal loans
Our team of consumer lending experts follow an objective and robust methodology to rate lenders and pick the best.
30+
Lenders reviewed
We review over 35 lenders, including major banks, top credit unions, leading digital platforms, and high interest installment lenders operating across multiple states.
25+
Categories assessed
Each lender is evaluated across five weighted categories and 27 subcategories, covering affordability, eligibility, consumer experience, flexibility, and application process.
60+
Data points analyzed
Our team tracks and reassesses hundreds of data points annually, including APR ranges, fees, credit requirements, and borrower tools, ensuring up to date, accurate comparisons.
Star rating categories
We evaluate more categories than competitors and carefully weigh how each factor impacts your experience.
NerdWallet’s review process evaluates and rates personal loan products from more than 30 financial technology companies and financial institutions. We collect over 60 data points and cross-check company websites, earnings reports and other public documents to confirm product details. We may also go through a lender’s pre-qualification flow and follow up with company representatives. NerdWallet writers and editors conduct a full fact check and update annually, but also make updates throughout the year as necessary.
Our star ratings award points to lenders that offer consumer-friendly features, including: soft credit checks to pre-qualify, competitive interest rates and no fees, transparency of rates and terms, flexible payment options, fast funding times, accessible customer service, reporting of payments to credit bureaus and financial education. Our ratings award fewer points to lenders with practices that may make a loan difficult to repay on time, such as charging high annual percentage rates (above 36%), underwriting that does not adequately assess consumers’ ability to repay and lack of credit-building help. We also consider regulatory actions filed by agencies like the Consumer Financial Protection Bureau. We weigh these factors based on our assessment of which are the most important to consumers and how meaningfully they impact consumers’ experiences.
NerdWallet does not receive compensation for our star ratings. Read more about our ratings methodologies for personal loans and our editorial guidelines.
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