How personal loans work

Personal loans are installment debts with fixed terms, fixed interest, and predictable monthly payments. They’re commonly used for debt consolidation, emergency expenses, or large purchases. In the U.S., APRs vary widely by credit tier. In Canada, banks and credit unions compete with online lenders for unsecured loans.

Rates & pricing

Expect lower APR with higher credit scores and stable income. Debt-to-income (DTI) ratio below 36% is ideal. Borrowers with thin credit files may consider secured loans or a co-signer.

• Excellent credit: typically single-digit APRs.
• Fair credit: mid-teens APR, sometimes higher.
• Poor credit: may face high APR caps; review provincial/state rules.

States & provinces highlights

U.S. state usury laws and licensing affect max APRs. In Canada, provincial regulations influence fees and collection practices. Credit unions often offer competitive rates in both countries.

How to qualify

1. Pull your credit report and dispute errors.
2. Lower credit utilization below 30% on revolving accounts.
3. Add income documentation (W-2/T4, pay stubs, bank statements).
4. Consider a smaller amount or longer term to reduce monthly payments.

Compare lenders & prequalification

Use soft credit check prequalification to view estimated rates without hurting your score. Compare origination fees, prepayment penalties, and rate discounts for autopay.

If consolidating debt, ensure the new payment is lower and you’re not extending the term so far that you pay more interest overall.

Money-saving tips

• Choose the shortest affordable term.
• Set up autopay to get a rate discount.
• Avoid add-on insurance products you don’t need.

FAQ: Personal loans