Everything you need to know about personal loans in 2025

What is a personal loan and how does it work?

Personal loans are a type of loan offered through private lenders. These loans grant users a lump sum of money they repay in monthly installments over a set time period, and they typically have fixed interest rates that can be much lower than the variable rates credit cards charge. Personal loans also tend to be unsecured, meaning borrowers don't have to put down collateral to qualify.

Another standout benefit of personal loans is their flexibility. Borrowers can use funds from these loans for nearly any purpose, including debt consolidation, wedding expenses, home remodeling projects, and more. Note: Some personal loans charge origination fees as high as 12% of the loan amount.

Can I apply for a personal loan online?

The best personal loans are typically found online, and many applicants use loan comparison sites to shop around. These platforms let you compare rates and terms across multiple lenders all in one place, and without visiting a physical bank branch.

Online services connect you with lenders based on your financial profile, often offering competitive interest rates and flexible repayment terms from 61 days to 144 months. Some personal loan companies even let you "check your rate" or prequalify online without a hard inquiry on your credit reports.

What information is required to apply?

Most personal loan applications only take a few minutes to complete. You'll typically need to provide:

• Full name and contact information: Plan to share your home address, date of birth, and Social Security number.

• Employment and income details: You may be asked to share pay stubs that prove current employment, income amounts, or both.

• Credit history and current debts: Some lenders may request additional verification depending on the amount requested.

What is APR and how is it calculated?

APR, or annual percentage rate, reflects the total yearly cost of your loan, including interest and fees. You can use a loan APR calculator or an APR calculator to estimate the rate based on your credit profile and loan term.

Online personal loan companies tend to offer fixed rates between 5.00% and 35.99%, with the best rates and terms going to those with high incomes and strong credit profiles.

How can I calculate monthly loan payments?

To estimate your monthly repayments, use a loan payment calculator or a personal loan calculator. These tools allow you to input:

• Loan amount
• Interest rate (APR)
• Loan term (months or years)

When you input these details in a personal loan calculator, you can get an idea of the monthly payment for the amount you want to borrow, the rate you qualify for, and your preferred repayment term. This also lets you see how your payment might change if you opt for a different loan amount, a different repayment term, or both.

What loan terms are available?

Repayment terms for personal loans can range from short-term (61 days) to long-term (up to 144 months), depending on the lender. The right repayment term for your needs depends on your budget and how quickly you want to pay off the debt. Always use a loan calculator to compare term lengths before committing to a monthly loan payment.

How to calculate a personal loan: step-by-step example

To estimate your monthly payment, use this formula:

Monthly Payment = [P x r x (1 + r)^n] / [(1 + r)^n – 1]

Where:

• P = loan amount
• r = monthly interest rate (APR ÷ 12 ÷ 100)
• n = number of monthly payments

Example:

Borrowing $10,000 at a 10% APR for 36 months:

• P = $10,000
• r = 0.0083 (10% ÷ 12 ÷ 100)
• n = 36 months

Monthly payment ≈ $322.67

Total repayment over 36 months = $11,616.12

While you should use an online loan calculator for convenience, this formula helps you understand the math behind each offer.

Loan example: How much will I repay?

Let’s say you borrow $5,000 over 36 months at a fixed APR of 10.5%, with a one-time origination fee of $60. Since origination fees are deducted from personal loan funds upfront, you would receive a lump sum of $4,940.

Your estimated monthly repayment would be approximately $162.51. Over the full term, you would pay a total of $5,850.44.