Personal loans are typically an amount of money borrowed from a bank, a credit union, or other lender — used for personal purposes. While many loans have a required usage, you are allowed to use personal loans for any purpose, as long as it’s legal. Some of the most common reasons for taking out a personal loan include paying for unexpected medical bills, tuition, car repairs, debt consolidation, and similar expenses.
To be eligible for a personal loan, you only need to meet some basic requirements. If your income is high enough to support a personal loan, and you have a good credit history, your application will probably be approved.
If you have a poor credit score, some lenders may only approve you for a secured loan, which will require you to back up your personal loan with collateral, such as your car. If you don’t pay off the personal loan on time, you may lose this asset.
If you have good credit and a stable source of income, you can potentially be approved for an unsecured loan, which doesn’t require you to back up the loan with any collateral. Typically, you pay off your loan, including interest, in monthly installments. The interest rate depends on the amount of money you’re borrowing and on the repayment period. Your credit score can also affect the interest rate; the higher the score, the lower the interest.
As for the amount of money you can borrow, some lenders have limits, and in these cases, even with a perfect credit score, you will only be allowed to borrow a certain amount of money. Generally, the principal depends on your income as well as your credit score.
If your credit score and your financial history aren’t perfect there are some lenders that may approve your loan regardless.