September 26, 2022


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Your Most-Googled Questions About Personal Loans Answered By An Expert

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Personal loans can help you finance some of life’s large purchases without the astronomical interest charges that generally come with using a credit card. Personal loans are typically used for personal expenses — like a home renovation, wedding or even debt consolidation. They also typically carry a lower interest rate compared to credit cards, so they are usually an attractive financing option for someone who wants to avoid large interest charges.

Regardless of how you hope to use a personal loan, it’s always important to do your research to make sure it suits your financial needs. There’s a ton of information out there and parsing through it all can feel overwhelming.

So, Select gathered a list of the most-Googled questions about personal loans and asked expert Leslie Tayne, a financial attorney and Founder and Director of Tayne Law Group, to provide answers. Here’s everything you need to know:

How do personal loans work and how do you apply for one?

How do I get a personal loan with bad credit? 

Payoff Personal Loans

  • Annual Percentage Rate (APR)

  • Loan purpose

    Debt consolidation/refinancing

  • Loan amounts

  • Terms

  • Credit needed

  • Origination fee

    0% to 5% (based on credit score and application)

  • Early payoff penalty

  • Late fee

    5% of monthly payment amount or $15, whichever is greater (with 15-day grace period)

According to Tayne, if you have bad credit you may also sometimes need a co-signer, or you may need to provide collateral to secure the loan. Securing the loan with a personal item, like a house or a car, means that the lender can seize that asset if you fail to make your loan payments.

If you have a lower credit score, you may also consider a lender that doesn’t charge any extra fees. An origination fee is calculated as a percentage of the loan amount and it can reduce the total loan balance you actually receive.

So if you’re looking at lenders that charge an origination fee, you might have to adjust the amount of money you’re requesting to accommodate for the cost of the fee. Otherwise, you might consider some lenders that don’t charge an origination fee at all, like LightStream or Discover, for example.

Of course, there are a ton of different options out there so comparing offers is one of the best ways to make sure you’re getting a personal loan with the best interest rate and payment terms. You can use this comparison tool from Even Financial to determine your top offers. The service is free, secure and won’t affect your credit score if you don’t apply for a loan.

Editorial note: The tool is provided and powered by Even Financial, a search and comparison engine that matches you with third-party lenders. Any information you provide is given directly to Even Financial. Select does not have access to any data you provide. Select may receive an affiliate commission from partner offers in the Even Financial tool. The commission does not influence the selection in order of offers.

What is the benefit to obtaining a personal loan? 

Chase Freedom Flex℠

  • Rewards

    Earn 5% cash back on grocery store purchases (not including Target® or Walmart® purchases) on up to $12,000 spent in the first year, 5% cash back on up to $1,500 in combined purchases in bonus categories each quarter you activate (then 1%), 5% cash back on travel booked through the Chase Ultimate Rewards®, 3% cash back on dining and at drug stores, 1% cash back on all other purchases

  • Welcome bonus

    $200 cash back after you spend $500 on purchases in your first three months from account opening

  • Annual fee

  • Intro APR

    0% for the first 15 months on purchases

  • Regular APR

    14.99% to 23.74% variable

  • Balance transfer fee

    Either $5 or 5% of the amount of each transfer, whichever is greater

  • Foreign transaction fee

  • Credit needed

Is personal loan interest tax deductible? 

How much of a personal loan can I get? 

“That is dependent upon what the lender is willing to give you based on your credit history,” Tayne said. “Lenders may usually approve you for up to $100,000, but it depends on your income and credit score.”

If you aren’t sure how much a particular lender will approve, it doesn’t hurt to ask prior to submitting your application.

What is the average interest rate on a personal loan? 

How long does it take to be approved for a personal loan? 

According to Tayne, it can take anywhere from one to seven days to be approved for a personal loan. Applicants can reduce the likelihood of any delays in the approval process by making sure they provide accurate information when filling out the application form.

Are personal loans bad? 

Can personal loans build your credit? 

Bottom line

Personal loans can be a great tool to help you build credit history or finance a large expense without paying high interest charges. However, like any other financial tool, they’re most advantageous when you have a plan for how you’ll use them.

Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.