Best Personal Loans in December 2024

If you need time to pay for a costly expense or you're looking to save money on debt repayment, a personal loan can help. The best personal loans come with low rates and few or no fees, a range of loan amounts and repayment terms, and fast funding. LightStream is our top pick for the best personal loan lender because the online bank offers all these features plus extra perks.

But the best lender for you may depend on your credit score and how you plan to use the funds. To select the best personal loans for a variety of needs, we compared 31 lenders based on over 800 data points so that you can make an informed choice and get the cash you need.

Best personal loans

PenFed: Best credit union for personal loans

PenFed is a credit union that offers personal loans to applicants with good credit. Though you'll need to become a member to receive a loan, membership is open to everyone. PenFed shines with no origination fees, small available loan amounts, and low interest rates. If you don't have a FICO score above 700, you may not qualify on your own, but can apply with a cosigner with good credit — which is not something most lenders offer.

PenFed doesn't have a minimum income amount, and offers live chat and an entirely online loan application process.

Methodology

Credible evaluated 31 lenders to find the best personal loans. Our team of experts gathered information from each lender's website, customer service department, directly from our partners, and via email support. We chose the best lenders based on the following weighted categories:

• Rates and fees: 18%
• Loan terms: 18%
• Customer experience: 17%
• Eligibility: 14%
• Customer satisfaction: 10%
• Efficiency: 10%
• Options for poor credit and no credit: 9%
• Discounts: 4%

Each data point was verified by a third party to make sure it was accurate and up to date. Learn more about how Credible rates lenders by exploring our personal loans lender rating methodology.

When will interest rates go down?

Lenders offer interest rates based on a variety of factors including your credit score, income, and debts, but current market and economic conditions also influence personal loan interest rates. The target range for the federal funds rate, a tool the Federal Reserve uses to regulate economic conditions, affects the rates that lenders charge generally.

Market conditions

In 2023, the effective federal funds rate peaked at 5.33%, with a target range of 5.25% to 5.50%, the highest rate in over two decades. It has since decreased to a target range of 4.25% to 4.50% on the Fed's latest rate cut in December 2024. Additional rate cuts may be on the way, but the Federal Reserve intends to reduce the rate gradually going forward due to persistent inflation.

Further rate cuts could lead to a decline in personal loan rates, but the impact may be minimal in the short term. "We're seeing some relief as inflation starts to stabilize, but it's tough to predict exact timing," explains Shukla. Lenders may also reduce interest rates due to other economic factors. "I've noticed that when economic conditions improve, rates tend to ease," says Shukla, "So we might see better rates in the next year if the market stays on track."

Tips on comparing personal loans

When applying for a personal loan, it's important to choose a lender that meets your needs and offers rates that fit your budget. Be sure to evaluate each lender based on the criteria below.

• Eligibility requirements: Some lenders have minimum income or credit score requirements, prohibit certain loan purposes, or may not be available in some states. Narrow down your options to lenders you can qualify with that also offer the type of loan you need.
• Loan amounts: Eliminate lenders that don't offer the amount you need. Typical loan amounts range from $1,000 to $50,000, but some lenders offer even larger loans. For example, BHG Financial offers loans of up to $200,000 to eligible borrowers. If you only need a small loan, you may want to explore local credit unions.
• Funding time: If you need an emergency loan, consider lenders that offer funding as soon as the same business day, like SoFi and LightStream.
• Customer experience: Look at customer reviews on third-party websites like Trustpilot. While it's common for a few borrowers to be unhappy with their experiences, recurrent complaints about similar issues should raise a red flag.
• Rates and fees: Look at each loan's annual percentage rate (APR), which includes the interest rate and any upfront fees. If the lender offers the opportunity to prequalify with a soft credit check, you can get an estimate of your APR without hurting your credit. Prequalification is an estimate and not an official offer of credit. Your rate may change once you formally apply.
• Repayment terms: Check your budget to see what monthly payment you can afford. A longer term will give you lower monthly payments, but you'll pay more in interest over time. You can use a personal loan calculator to see how your loan term affects your monthly payment and total interest costs over the life of the loan.
• Discounts, resources, and perks: If you're still deciding between a few lenders that offer similar rates and terms, check to see if any offer rate discounts or referral bonuses. Consider whether you can change your due date, make payments via their mobile app, and explore other perks.

What is a personal loan and how does it work?

A personal loan is a lump sum of cash that you repay with interest by making regular monthly payments to the lender over a period of time. The lender profits from issuing the loan by charging interest and, sometimes, fees. Most personal loans have fixed interest rates, so your payments stay the same each month. Most are also unsecured, so you don't have to offer property such as a car or home as collateral.

You can get a personal loan from a bank, credit union, or online lender. When you apply for a personal loan, the lender evaluates your credit score, income, and other financial information to determine whether you qualify and to set your interest rate. The lender may also charge an upfront fee, known as an origination fee, for processing the loan and to reduce its risk in lending to you.

You may get a choice of repayment term, typically ranging from one to seven years. That term, along with the loan amount and your interest rate, determines what you're required to pay each month. Most personal loans amortize, so more of your monthly payment will go toward interest at the beginning of the term, though the payment amount remains the same.

What are personal loans used for?

You can use a personal loan for many kinds of expenses or purchases. The most common uses for personal loans are debt consolidation and home improvement, according to Credible marketplace data.

Loan use restrictions vary depending on the lender you choose, so confirm the loan's purpose in your loan agreement before accepting a loan offer. You're also obligated to use your loan for the specific purpose you applied for (and listed in the loan agreement). The table below shows some of the most common permitted and restricted uses for personal loan funds.

You could use a personal loan to fund an expense not listed above, as long as it's one of the lender's approved uses, but avoid using a personal loan for an unnecessary purchase. For example, your lender may allow you to use the cash to buy a designer handbag, a motorcycle, or a concert ticket, but it's generally better to save for these purchases in advance.

Current average personal loan interest rates

The average interest rate on a two-year personal loan is 12.33%, according to the Federal Reserve. But current loan rates may range from around 7% to 36%, depending on the lender you choose, the loan amount and repayment term, your credit score, and other financial information.

Average personal loan rates by credit score

Pros and cons of personal loans

Taking out a personal loan can offer many benefits. Shukla says a personal loan for debt consolidation can improve your credit score, as long as you make your payments on time. "For example, we had a client who took out a personal loan to consolidate credit card debt with high-interest rates. By making regular, on-time payments and reducing their overall debt load, they saw their credit score jump by over 50 points in just a few months."

Sean Briscoe, Director of Products and Payments at Alliant Credit Union, says the variety of ways you can use a personal loan is a major benefit — especially when you're facing a cash-only expense. "A personal loan also offers you the ability to have cash, which is better for those times when credit cards are not useful or accepted forms of payment — for example, when hiring a contractor for home repairs," he says.

There are also some drawbacks to consider, including possible upfront fees and a higher debt balance.

How to qualify for a personal loan

Personal loan eligibility requirements vary by lender, but you'll generally need the following to qualify:

• A fair credit score or better: Most lenders require at least fair credit, and some only lend to borrowers with good or excellent credit. However, a few lenders specialize in working with borrowers who have credit issues — for example, Upstart considers borrowers with poor credit or no credit history. Some lenders don't disclose specific credit requirements, but you can typically prequalify to find out if approval is likely.
• Enough income to pay your debts: All personal loan lenders require that you have a source of income, but it doesn't necessarily have to come from a job. Some lenders have a strict minimum income requirement, while others are more flexible. Lenders also check your debt-to-income ratio (DTI) to ensure you can manage more debt. You can calculate your DTI by dividing your minimum monthly debt payments by your total monthly income before taxes. Most lenders look for a DTI of less than 36%.

How to get a personal loan with bad credit

Getting a personal loan with a bad credit score (a FICO score below 580) can be tricky, but it's not entirely impossible. Try these tips if you're having trouble qualifying:

• Look for bad-credit lenders: Some lenders specialize in personal loans for bad-credit borrowers. You can also get an installment loan with no hard credit check through lenders like OppLoans, but these loans typically come with higher APRs.
• Prequalify: Prequalifying helps you estimate which loans you'll be eligible for. It's not a guarantee of approval, though, and prequalified rates may not reflect the rates in the actual offer.
• Apply for a lower amount: If you can't qualify for the amount you need due to insufficient income or a high DTI, try asking for less.
• Consider secured loans: You may have an easier time qualifying for a personal loan that's secured by an asset, like your home or vehicle. "This reduces the risk for the lender and can make it easier to get approved," explained Brisco.
• Apply with a cosigner or joint applicant: A cosigner is someone with good credit who agrees to be responsible for the loan if you fail to repay. A co-applicant does the same, but also has access to the funds. Either can help you qualify for a personal loan if you have bad credit.

Steps for applying for a personal loan

1. Check your credit: You can access your free credit reports with Credible's credit monitoring tool. Be sure to check for common errors, like accounts that aren't yours, and dispute them if necessary. Knowing your credit score will help you determine which lenders you may qualify with.
2. Calculate your income and current debts: Calculate your total gross monthly income from all sources. Then, add up the minimum monthly payments on your existing debts. Divide your monthly debt payments by your gross monthly income and multiply that number by 100 to get your debt-to-income ratio (DTI), which is a percentage. You may have a hard time qualifying for a loan if your DTI is too high. Some lenders have minimum income requirements as well.
3. Determine how much money you need: If you're trying to pay off a credit card, for example, check your current account balance. In the case of a car repair, call the auto body shop for an estimate. If you're looking to pay for home renovations, get an estimate from your contractors (and add a cushion in case of cost overruns). In other words, get as close as you can to an exact dollar figure and use it as your desired loan amount.
4. Determine the monthly payment you can afford: Review your budget to see how much discretionary income you can devote to comfortably repaying your personal loan.
5. Compare lenders: Evaluate each option based on the factors in the earlier section of this guide.
6. Prequalify: Go through the prequalification process with a handful of lenders, so you can compare personal loan rates and term options. Lenders use a soft credit check to give you an estimate, so you won't risk damage to your credit.
7. Apply: Choose a loan offer. Depending on the lender, you may need to authorize a hard credit check to continue with the application. You may be asked to provide proof of income and employment.
8. Sign: If you're approved, review the loan agreement carefully before signing. Then, the lender can transfer the funds to your bank account.

Learn More: How to Apply for a Personal Loan

Alternatives to personal loans

If a personal loan isn't right for you, you might consider one of the following alternatives.

If you're a homeowner

• Home equity loan: If you have enough equity in your home, you can borrow against it by taking out a home equity loan, also known as a second mortgage. You may qualify for a lower interest rate than you would get with a personal loan, a longer repayment term, and a larger amount. However, there may be more upfront costs to worry about, and it takes longer to get the funds. There's also a risk of foreclosure if you can't keep up with the payments.
• HELOC: A home equity line of credit (HELOC) is another way to borrow against the equity in your home. It's a revolving line of credit, much like a credit card, that replenishes as you make payments. HELOCs often feature a draw period during which you make interest-only payments, followed by larger monthly payments later on. HELOCs may have variable interest rates, which can make it harder to budget for payments.
• Cash-out refinance: With a cash-out refinance, you pay off your existing mortgage with a new larger mortgage and receive the difference in cash. Your mortgage payment could increase, but you could net a lower interest rate. Make sure you can afford repayment, as foreclosure is a risk with any loan that uses your home as collateral.
• Reverse mortgage: If you're 62 or older, you can borrow against your home equity without making monthly payments. You can either receive the cash in a lump sum or on an ongoing basis. Your loan balance increases over time, and the full balance is repaid once you no longer live in the home. Note that these loans can have high closing costs and you'll be required to carry mortgage insurance. You'll be required to speak with a HUD counselor before taking one out.
• Home equity investment: A home equity investment is not a loan, but rather an agreement to share a portion of your home's future value with a company in exchange for receiving a portion of your current home equity in cash. It's easy to qualify, even with poor credit, and you don't need to take on any new debt, but you may lose a significant portion of the profit when you sell your home.

If your expense is small or ongoing

• Credit card: Most credit cards offer a grace period between your billing date and due date — you can avoid paying interest as long as you pay on time and in full. With a 0% APR offer, you could avoid interest for as long as 21 months as you pay for a new purchase or complete a balance transfer from another credit account. The only catch is that you have to pay off the new card before the introductory zero-interest offer ends or the card's regular APR will apply to any remaining balance.
• BNPL: Buy Now, Pay Later providers offer a way to pay for online purchases at select retailers over time. They typically offer a short-term, interest-free option, but if you need longer than six weeks for repayment, rates may be similar to or higher than personal loans.
• Personal line of credit: A personal line of credit (PLOC) is similar to a credit card — you can borrow repeatedly up to your credit limit, and your credit line replenishes as you make monthly payments. Your interest rate may be lower than the typical credit card APR, and you can use a PLOC to access cash or write checks.

If you have bad credit

• Salary advance: If you're facing financial hardship, your employer may be willing to lend you money from a future paycheck. Your employee handbook may contain a process for requesting a salary advance.
• 401(k) loan: If your plan sponsor allows, you can borrow from your 401(k) account. 401(k) loans have five-year terms, and don't require a credit check, but you'll need to repay the loan with interest to avoid taxes and potential penalties. The money, plus interest, goes back into your retirement account. Be careful with this approach as you could miss out on market gains and set your retirement years back, especially if you can't repay the loan. If you might leave your job within the next 5 years, consider other options, as the full balance becomes due when your employment ends.
• Cash advance app: Cash advance apps provide a small advance on your next paycheck without a credit check. Some apps require a membership or other fees, while others make money from optional tipping. You typically need a bank account that receives direct deposits to get a cash advance. Note that cash advance apps have APRs nearly as high as payday loans and are not a long-term solution.
• Payday alternative loan: PAL I and PAL II loans are small loans up to $2,000 offered by credit unions to their members. They may not require a credit check. The maximum interest rate is 28% and you may have up to a year for repayment.
• Family loan or crowdfunding: If you can't qualify for a loan or you can't afford to repay one, consider asking your family for help or setting up a crowdfunding campaign to collect funds from your social network. Note that a family loan will need to be drawn up with a formal loan agreement according to the laws of your state.The family member who loans you the money will need to apply the appropriate interest rate, outlined by the IRS.

Related Articles:

• Best Personal Loans for Bad Credit
• Best Personal Loans for Fair Credit
• Best Personal Loans for Good Credit
• Best Personal Loans for Excellent Credit
• Best Same-Day Personal Loans