You can use a personal loan for a wide variety of purposes, including debt consolidation and refinancing. However, lenders may have restrictions against things such as paying off student loans or buying a house. Here’s a look at some of the common ways to use personal loans.
Debt consolidation and refinancing
Many borrowers use personal loans to consolidate their debt or refinance an existing loan. They can be a great way to pay off debts with higher interest rates, like credit cards, potentially get a lower annual percentage rate (APR), and help pay off debt faster. According to the Federal Reserve, the average interest rate on credit cards was 21.59% as of February 2024, compared to 12.49% for two-year personal loans from banks.
For example: Let’s say you have three credit cards, and each one has a $2,000 balance and a 20% APR. If you prequalify for a $6,000 loan with a 10% APR, you can use the loan to pay off all three cards.
After paying off the cards, you’ll have one fixed payment due each month instead of three, and be given a set term to pay off the debt. Paying off the $6,000 balance over a two-year term with the lower-APR personal loan, in this case, would also save you $684 more in interest than if you had paid it off over the same term on the credit cards.
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Home renovations or repairs
Personal loans are also often positioned as home repair or renovation loans. While homeownership helps you build wealth with each mortgage payment, it also comes with hefty upkeep expenses. For example, the average cost of a roof replacement is about $9,200, according to Angi, while new A/C units cost about $6,000. Personal loans can help you cover expensive repairs and home improvement projects like renovating a bathroom, kitchen, or basement.
Emergency expenses
An emergency personal loan can help you get quick access to funds for an unexpected expense. For example, if your pet gets sick or hurt and needs emergency vet care, it can cost anywhere from $150 to $250 dollars for an emergency X-ray and up to $5,000 or more for emergency surgery. Medical bills, dental bills, funeral expenses, and auto repairs also can be expensive and pop up unexpectedly.
Big life events
Personal loans are commonly promoted as a way to expense big life events like engagements, weddings, moves, family reunions, and vacations. They can be helpful if you want or need to fund a life event before you’ve saved the full amount for it.
Good to know
Most lenders ask your reason for taking out a personal loan on your application and require you to use the funds solely for that purpose. Others may let you use the funds how you see fit, with only a few restrictions.
Advertiser DisclosureOverview
Lightstream is one of three Credible partner lenders to offer loan amounts up to $100,000, which makes it ideal for financing large expenses like home improvements or weddings. Funds are available as soon as the same day you apply, and you'll have up to 12 years to repay certain types of loans, including home improvement loans, RV loans, and boat loans. There are no origination fees, and rates are low — Lightstream's lowest APR beats SoFi's advertised lowest APR by 1 percentage point. But you'll need good credit to qualify.
Unlike most lenders, Lightstream does not let you prequalify on its site. Nor does it provide a contact phone number next to its customer service hours on its website.
Repayment terms
2 - 12 years, depending on loan purpose
Eligibility
Available in all states except RI and VT
Time to get funds
As soon as the next business day
Loan uses
Credit card refinancing, debt consolidation, home improvement, and other purposes
Read full reviewOverview
Upstart has one of the lowest available APRs of Credible partner lenders and of all non-partners we reviewed, making it a good choice for well-qualified applicants. However, it's also is one of few lenders that doesn't have a minimum credit score requirement (if you apply on the lender's website), which makes it an option if you have bad credit or no credit history. Upstart may charge an origination fee as high as 12%, but good-credit borrowers may not be charged one at all.
Trustpilot gives Upstart 4.9 stars, which is the highest of all lenders we reviewed.
Time to get funds
As soon as 1 to 3 business days
Loan uses
Pay off credit cards, consolidate debt, relocate, make a large purchase, and other purposes
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Discover Personal Loans offers low APRs, repayment terms up to seven years, no origination fees, nationwide availability, and doesn't require your Social Security number to prequalify on its site. You'll need to have an annual income of at least $40,000, and a FICO score 660 or higher, to be eligible. If your credit score is fair or poor, you'll need to go elsewhere, as Discover doesn't allow cosigners.
Funds are available as soon as the next business day after loan approval.
Eligibility
Available in all 50 states
Time to get funds
Funds can be sent as soon as the next business day after acceptance
Loan uses
Auto repair, credit card refinancing, debt consolidation, home remodel or repair, major purchase, medical expenses, taxes, vacation, and wedding
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Upgrade has a suite of features that make it a very attractive lender: competitive interest rates, discounts for direct pay and autopay, as soon as same-day funding, up to seven-year repayment terms, and nationwide availability. Plus, loans are available to fair-credit borrowers, and you don't need to input your Social Security number to prequalify on the website. Upgrade even offers secured personal loans, which is not common among lenders.
However, Upgrade does charge an origination fee of 1.85% to 9.99%. You must have a FICO score of at least 600 and a minimum income of $25,000 annually to qualify.
Loan amount
$1,000 to $50,000 ($3,005 minimum in GA; $6,600 minimum in MA)
Loan uses
Credit card refinancing, debt consolidation, home improvement, major purchase, other
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LendingClub is a solid lender for good credit borrowers and some fair credit borrowers that apply directly on its website. It's easy to prequalify with LendingClub, especially if you're uncomfortable providing your Social Security number, as the company doesn't require it at the prequalification stage. (You will need to provide it if you move forward with a full application.)
While prequalification is not a guarantee that you'll be approved for a loan, LendingClub does a better job than most other Credible partner lenders at approving applicants that have successfully prequalified. In other words, you're less likely to have your application declined once you apply (if you've already prequalified). LendingClub may charge an origination fee between 3% and 8%.
Eligibility
Available in all 50 states
Loan uses
Debt consolidation, paying off credit cards
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SoFi stands out for offering no-fee personal loans with competitive rates, high loan amounts, long loan terms, discounts for autopay and direct pay, and funding as soon as the same day. Plus, SoFi prioritizes convenience for existing and potential customers with features like live chat and an easy prequalification process that doesn't require your Social Security number.
The main catch is that you need to qualify for a loan with SoFi, which can be hard to do if you don't have good credit. You also won't be able to apply with a cosigner, since SoFi doesn't accept cosigners; nor does it offer secured personal loans.
Fees
Option to pay an origination fee (up to 6%) in exchange for a lower rate
Time to get funds
Typically within a few days, given approval and bank account verification, but sometimes within the same day
Loan uses
Solely for personal, family, or household uses
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Best Egg is a solid lender for a wide range of borrowers and, notably, scored second for personal loan satisfaction in J.D. Power's Consumer Lending Study. It offers competitive rates, reasonable loan terms and amounts, and personal loans for fair credit. You'll need a FICO score of at least 600 to qualify, but the lower your score, the higher your APR may be. The APR includes the interest rate and origination fees, which range from 0.99% to 8.99% with Best Egg.
Note that if you successfully prequalify with Best Egg, you may be more likely to be approved for the loan relative to other lenders you prequalify with. Based on Credible data, borrowers who chose to apply for a loan with Best Egg were more than twice as likely to be approved (relative to most other Credible partners).
Fees
Origination fee, late fee, unsuccessful payment fee, check processing fee
Eligibility
Available in all states except DC, IA, VT, and WV
Time to get funds
As soon as 1 to 3 business days after successful verification
Loan uses
Credit card refinancing, debt consolidation, home improvement, and other purposes
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Avant personal loans are a good choice for borrowers with bad credit looking for small- to moderate-sized personal loans. Loans are available up to $35,000 and you could get the money as soon as the next business day after approval. Plus, Avant is more likely than some lenders to approve the applications of borrowers who've prequalified with Avant. However, the lender charges an origination fee up to 9.99%, and its top-range interest rates are among the highest of the lenders we reviewed.
Fees
Origination fee, late fee, dishonored payment fee
Eligibility
Available in all states except HI, IA, MA, ME, NY, VT, and WV
Time to get funds
As soon as the next business day (if approved by 4:30 p.m. CT on a weekday)
Loan uses
Debt consolidation, emergency expense, life event, home improvement, and other purposes
Repayment terms
1 to 5 years (2 to 5 years through Credible)
Read full reviewOverview
It’s worth considering a personal loan through Splash if you have good credit (ideally, a FICO score above 700). The platform offers loans from a wide range of lenders, and next-day funding is available. Plus, Splash has a live chat feature so you can get real-time answers without having to wait on hold or for an email. Loans are available up to $100,000 if you apply via Splash’s website.
Rates are competitive, but borrowers with excellent credit may find lower APRs elsewhere. If you need a repayment term longer than five years, you’ll need to look elsewhere as well.
Loan amount
$5,000 - $100,000 (up to $35,000 on Credible)
Eligibility
Available in all states except VT. OH and NM net disbursed amount must be greater than $5,000. MA must be greater than $6,000
Time to get funds
Same day available, typically 1-3 days
Loan uses
Debt consolidation, home improvement, medical expenses, major purchases
Read full reviewOverview
Universal Credit is one of a handful of lenders that offers personal loans for bad credit. If your FICO credit score is at least 560, you may be eligible for a Universal Credit personal loan. It offers loan amounts up to $50,000, repayment terms up to seven years, and discounts for direct pay and autopay. Funds are available as soon as the next business day after loan approval.
Note that rates and fees can be relatively high — you may pay an origination fee from 5.25% to 9.99%, and APRs start at 11.69%. If you get a loan with a high interest rate, consider refinancing your personal loan at a lower rate once you've improved your credit score.
Eligibility
A U.S. citizen or permanent resident; not available in DC, IA, SC, WV
Time to get funds
As soon as 1 business day after acceptance
Loan uses
Debt consolidation, pay off credit cards, home improvements, unexpected expenses, home and auto repairs, weddings, and other major purchases
Read full reviewOverview
Happy Money has been in operation since 2009 (formerly known as Payoff). It's an option for fair-credit borrowers (plus those with better credit), and notably has a relatively low top-end APR. In other words, you could qualify for a lower rate with Happy Money with fair credit, relative to other lenders that offer fair-credit loans. The company does charge an origination fee on some loans, up to 5%, but that's not as high as some other lenders' origination fees.
You should be prepared to wait a few days to get your money, as funding can take three to five days once approved. And loans aren't available in Massachusetts or Nevada. Happy Money has an A+ rating with the BBB and is ideal for debt consolidation and credit card consolidation loans.
Eligibility
Available in all states except MA, MS, NV, and OH
Time to get funds
As soon as 2 - 5 business days after verification
Loan uses
Debt consolidation and credit card consolidation only
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BHG Money stands out for offering the largest loan amounts — up to $200,000 — of any Credible partner lenders. Simply put, if you need an unsecured personal loan over $100,000, there are very few places to look, but BHG is one. You'll have up to 10 years to repay the loan, but you'll need an annual income of at least $100,000 to qualify and a FICO score that's 660 or higher. However, if you have a cosigner that meets these requirements, BHG will consider your application.
Loan amounts start at $20,000, so look elsewhere for small loans. And BHG charges a modest origination fee between 2% and 4%, depending on your financial profile. Loan funds are available within three to 14 days of loan approval. Note that you can't prequalify with BHG.
Fees
Origination fees, late fees
Eligibility
Available in all states except Maryland and Illinois
Loan uses
Debt consolidation, baby (adoption), engagement ring financing, moving (relocation), business, home improvement, special occasion, cosmetic procedures, major purchase, taxes, credit card refinancing, medical expenses, vacation, wedding, other
Read full reviewFees
Origination Fee, $15 Late Fee, $25 NSF Fee
Eligibility
Available in all states except CO, CT, ME, NV, NH, TN, VT, WV, WY, and all U.S. Territories
Time to get funds
Funds typically deposited into your account in 1 business day13
Loan uses
Debt consolidation, credit card refinancing
Read full reviewOverview
OneMain Financial has multiple options for bad-credit personal loans. There is no minimum credit score required (if you apply directly with OneMain), which means you could get a loan with bad credit (FICO below 580). Plus, cosigners are allowed — a cosigner is someone (ideally, with good credit) who promises to repay the loan if you can't, which can make it easier to qualify or lower your rate. And, secured personal loans are available. You secure a loan with collateral, which may also help you qualify or lower your rate.
Rates are higher than competitors and OneMain charges origination fees as either a flat fee up to $500, or a percentage from 1% to 10% (depending on your state of residence). Note that even if you prequalify for a personal loan with OneMain, getting approved isn't a given.
Fees
Origination fee, unsuccessful payment fee, late fee
Eligibility
Must have photo I.D. issued by U.S. federal, state or local government
Time to get funds
As soon as 1 to 2 days after acceptance
Loan use
All except business, and education
Read full reviewWhat you can’t use a personal loan for
While personal loans are versatile, lenders tend to place a few restrictions on their use.
- College tuition and expenses: Lenders typically won’t allow you to borrow money to pay your tuition or use the money for educational expenses. Instead, a federal or private student loan is more suited for that purpose.
- Using funds to start a business: Similarly, you often can’t use a personal loan to start your own business. You can get a loan from the Small Business Administration or a lender who specializes in business loans to help with your business expenses.
- Making a down payment: Personal loans generally can’t be used for a down payment on a home. There are, however, down payment assistance programs available, such as grants and first-time homebuyer programs from state governments.
- Illegal activities: It should go without saying, but you can’t use personal loans for illegal activities, or things like gambling.
Acceptable loan uses can vary, so you’ll want to check a lender’s restrictions before accepting a loan.
How to compare personal loans
A wide range of companies offer personal loans that can vary greatly in terms of size, term length, cost, and more. Here are the main factors to consider:
- APR: Your APR indicates the total cost of the loan per year and accounts for the interest rate and upfront fees, like origination or administrative fees, which can be anywhere from 0% to 12%, depending on your credit.
- Loan amount: A lender’s general maximum loan limit won’t be available to every borrower, but typical loan amounts range from $600 to $50,000, though some lenders will lend up to $100,000 or $200,000.
- Loan term: Lenders vary in the amount of time they’ll give you to repay a loan. Typical terms range from 1 to 7 years, but longer terms may be available for certain purposes, like home improvement loans. Shorter terms lower your overall interest costs, but result in higher monthly payments.
- Customer satisfaction: Read reviews from past borrowers to learn how satisfied they are with their loan experiences. Look for patterns in the reviews, whether positive or negative.
- Funding time: If you’re in a hurry, a lender’s funding time will be important. Some lenders can fund as soon as the same or next business day, but generally expect it to take up to a week, depending on the lender.
By reviewing personal loan quotes according to these factors, you can figure out which lender will be a good fit for your situation.
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How to apply for a personal loan
Here’s how the process typically works:
- Check your credit: Before applying for any loan, check your credit reports and scores. Make sure all of the information is correct and look for opportunities to make quick improvements. Most lenders prefer a credit score of 670 or more, but if your credit is less than ideal, there are lenders who specialize in bad-credit loans.
- See if you prequalify: Most personal loan lenders let you check if you’re prequalified for a loan. Collect quotes from various lenders to get an idea of the rates and terms available to you. Note that even if you prequalify, it is not a guarantee of an offer of credit. You’ll still need to submit an application. Additionally, your final rate could be different than what you were quoted in the prequalification process.
- Compare quotes: Once you have a few quotes, compare them to see which will be the best fit. Consider factors such as loan amounts, APRs, monthly payment amounts, terms, and funding times.
- Submit an application: If you receive a quote that suits your needs and budget, notify the lender that you want to move forward. The full application process can vary, but lenders will at this point conduct a hard credit inquiry, which may ding your credit score temporarily. The lender will often request documents such as pay stubs, bank statements, and a government-issued ID.
- Get your funds and begin repayment: Upon final approval, you’ll sign the loan documents and the lender will send the loan funds to your bank account. Your first payment will typically come due the following month.
Personal loan FAQ
How does a personal loan work?
After you get approved, a personal loan lender provides you with a lump sum amount, often via direct deposit into your bank account. If you're consolidating debt with a personal loan, the lender may send the money directly to your creditors. Either way, you'll repay the amount over a set term through fixed installment payments each month. Along with the principal, you’ll repay interest and any fees according to the loan's APR.
What are some personal loan alternatives?
You can also get a loan from a friend or family member, request a cash advance through a credit card or app, or get a personal line of credit. If you’re looking to make a retail purchase, you can also look into “buy now, pay later” services. As a last resort, payday loans are also available, but they come with high APRs — around 400% — and must be repaid by your next payday.
Where can I get a personal loan?
Personal loans are available from banks, credit unions, and online lenders. Credit unions require you to be a member to get a loan, but banks and online lenders don’t require such restrictions.
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Meet the expert:
Jessica Walrack
Jessica Walrack is a freelance finance writer and journalist with over a decade of experience. During that time, she’s written hundreds of articles about loans, insurance, banking, mortgages, credit cards, budgeting, and taxes for well-known publications including CBS News MoneyWatch, USA Today, US News and World, Investopedia, and The Balance Money.