What Is a Personal Loan? and Who Can Get a Personal Loan?

 What Is a Personal Loan?

A personal loan is a lump sum you can borrow from a bank, a credit union or an online lender and repay over a fixed amount of time, unlike a credit card or line of credit.

Personal loans are typically unsecured, which means they are supported by your creditworthiness rather than collateral. Collateral is an asset, such as a car or house, a lender may use to recoup its losses if you default on a secured loan.

You can get a personal loan from different types of lenders, including traditional brick-and-mortar banks and online lenders. They serve borrowers with varying credit scores, income levels and other requirements.

Who Can Get a Personal Loan?

Lenders often set minimum requirements and will likely look at your credit score, payment history, income and debt-to-income ratio.

If you’re furloughed or unemployed, the lender may ask you for documentation that indicates when you’ll return to work, such as your furlough letter or a job offer.

Age eligibility requirements can vary by lender or by state and territory laws. Generally, consumers must be 18 to apply, but some states may require borrowers to be 19 or 21.

If you’re applying for a secured loan, the lender will also consider your collateral.