Top Personal Loans of 2026

Reasons to Apply for a Personal Loan

One of the many benefits of personal loans is their flexibility, allowing them to be used for almost any purpose. Whether you’re interested in paying off debt or making a major purchase, there’s likely a personal loan to fit your needs.

Keep in mind that some lenders require (legally) that you use the money you receive from them for the purpose you stated when you applied for the loan. Be sure to check the terms and conditions for details about how you may use any funds you apply for.

Below are a few common reasons you might choose to apply for a personal loan.

1. Consolidating Debt

If you’ve incurred debt from sources such as credit cards or unpaid bills, a debt consolidation loan might help. 

In debt consolidation, the funds you receive are used to pay off your outstanding debts. Then you pay back the loan in installments. The top personal loans may have lower interest rates than those on credit cards or other forms of debt, which could save you money in the long run. 

If you need to repay outstanding debt balances with high interest rates in a timely manner, you might want to consider using a personal loan to consolidate your debt.

2. Home Improvement

As a homeowner, you know that maintaining a home is a big responsibility. Sometimes, you need extra cash to cover repairs and preventive maintenance. A personal loan could help pay for anything from touch-up paint to new appliances and major upgrades. If you have an unexpected home expense that needs immediate attention, such as a plumbing or electrical issue, an online personal loan may be a way to receive financing quickly.

3. Emergency Medical Costs

Accidents and illnesses are wildly unpredictable, changing your whole life in the blink of an eye. As a result, you may end up with large medical bills you can’t afford to pay on time. 

If you’ve already exhausted all other payment options with the hospital (some offer payment plans) and your health insurance provider, a quick personal loan may help you repay outstanding medical bills. If you have excellent credit, a personal loan might also provide a less-expensive alternative to paying with a credit card. 

4. Purchasing a Car

When you’re shopping for a car, you typically have loan options. You might get financing directly from the car dealership, apply for online loans, take out an auto loan with your bank, or use a personal loan. 

Sometimes, a personal loan or auto loan from a bank has interest rates without any markup, but they may come with other conditions, depending on whether you’re buying a new or used vehicle. Compare your options to shop for favorable rates and terms.

5. Starting a Small Business

If you’re just starting a business, there may be small business loans to meet your needs. 

However, if you haven’t yet established business credit, it may be difficult to qualify for a small business loan. In that case, consider using a personal loan as a possible alternative for securing funds. If you have good personal credit, banks or online lenders may be able to provide you with a personal loan for business.

It’s important to note that some personal lenders may not allow borrowers to use the funds for business expenses. Make sure you check for any restrictions against using a personal loan for business purposes before submitting your application. 

Types of Personal Loans 

When you’re looking for the right personal loan for your needs, there are a few different options to consider. Here are some common types of personal loans.

1. Unsecured Personal Loan

What Is It?

Unsecured personal loans are lending options that don’t require the borrower to put up collateral. They’re a higher risk for the lender, and qualification is based on the borrower’s creditworthiness. Therefore, borrowers with a long, strong credit history may have an easier time qualifying for unsecured personal loans compared to those with bad credit.

Why Choose It?

Unsecured loans may be an option if you have good to excellent credit and don’t want to take on the risk of offering collateral to get a loan. When you offer collateral, if you default on paying back your loan, the borrower may be able to seize your collateral as payment.

Keep in Mind

Because unsecured loans are riskier for the lender, they may come with higher interest rates than secured loans. For the same reason, if you have no credit or poor credit, it may be more difficult to get an unsecured loan. You may also need to show proof that you’re making a reliable income.

2. Secured Personal Loan

What Is It?

A secured personal loan is one backed by collateral, such as a home, car, or personal savings. If you default on your loan, the lender may seize the collateral as payment. Compared to unsecured personal loans, secured loans are less risky for the lender, so they may provide higher loan amounts, lower interest rates, and easier qualification requirements.

Why Choose It?

If your credit score is low and you have collateral to offer, a secured loan may be a good personal loan for you. Additionally, secured personal loans may come with lower interest rates than unsecured loans because the collateral makes them less risky to lenders. 

Keep in Mind

With a secured loan, you’re likely offering up something valuable as collateral. Before committing to the loan, take some time to assess and eliminate any possible roadblocks to repayment. Otherwise, you risk losing whatever you put down as collateral, which could potentially have big repercussions.

3. Variable-Rate Loan

What Is It?

Variable-rate loans have interest rates that fluctuate with index rates, meaning your personal loan interest rate may change from month to month. If you decide to pursue this option, make sure you understand the terms of your loan and are clear on what index the interest rates track against.

Why Choose It?

If you’re seeking a shorter repayment term, a variable-rate loan may be a good option since the starting interest rates are typically lower than those for fixed-rate loans. Variable-rate personal loans may also have a cap that limits rate rises.

Keep in Mind

Changes to the loan’s interest rate may make it difficult to budget for the future. Check with your lender if its variable-rate loan has an annual percentage rate (APR) cap and if so, what it is. Because rates may change from month to month, the APRs potentially could as well. 

4. Fixed-Rate Loan

What Is It?

A fixed-rate personal loan has an interest rate that never changes, keeping your monthly payments the same for the life of the loan. A fixed-rate loan may be preferable for long-term personal loans since the stable interest rate provides a clear idea of long-term financing costs. 

Why Choose It?

You might consider a fixed-rate personal loan if you want predictable payments to allow you to plan your finances and budget more accurately. Your interest rate remains the same regardless of how index rates change over the years.

Keep in Mind

If index rates are relatively low, you could end up paying more interest on a fixed-rate loan than you would with a variable-rate loan, which changes with the index. Compare the rates and terms for personal loans online, and read what other borrowers have said about their experience with fixed- and variable-rate loans to help you decide which option might be right for you.

5. Personal Loan With a Cosigner

What Is It?

Cosigned personal loans allow a borrower who wouldn’t normally qualify on their own to bring in a cosigner. Often, the borrower has no credit, a limited credit history, or poor credit. If the borrower defaults on the loan, the cosigner is responsible for repaying the loan.

Why Choose It?

If you need a personal loan and have little to no credit, a cosigner may be able to help you get approved for a loan with lower interest rates and more favorable terms than you could get on your own. Cosigned loans are also useful personal loans for building credit if you’ve never had a credit card or borrowed money before.

Keep in Mind

Both the borrower and cosigner are responsible for the loan. If payments are late or go unpaid, both the borrower’s and the cosigner’s credit may be affected.

Applying for a Personal Loan Online

Applying for personal loans online is often quick and simple. Keep in mind that a personal loan from an online lender may carry a higher interest rate than a loan from a traditional bank or credit union would. Online loans are often unsecured, so no collateral is necessary.

Here are some steps to take before applying for a personal loan:

• Check your credit. Your credit score is key to qualifying for a personal loan. If you identify errors, resolve them before applying for loans. If you have poor credit and you have time to improve it, work on building credit before you apply.

• Decide how much you need: Determine the loan amount that serves your needs and aligns with your personal financial goals.

• Know your debt-to-income ratio (DTI). Your DTI is how much you have in monthly debt payments divided by your gross monthly income. Essentially, it tells lenders what percentage of your income already goes to paying off debt, which means the lower it is, the better. Personal lenders have different DTI requirements but generally look for a DTI below 43%.

• Research and compare top personal loan options. There are numerous options, from banks to online lenders, each with pros and cons. Compare rates, terms, and conditions to make sure the lender you choose aligns with your needs.

After you’ve completed the steps above, follow these steps to apply for an online loan:

1. Get prequalified. Once you’ve narrowed down your top online lenders, get prequalified to see which online loans you may be eligible for. Lenders usually do a soft credit inquiry, though some may use a hard credit check.

Prequalification doesn’t guarantee approval, but it does give you an idea of which loans could be suitable for you. Depending on the lender, prequalification may take just a few minutes and only require that you provide a few pieces of information in an online form.

2. Choose loan(s) and fill out application(s). After you’ve determined one or more good personal loans for your needs, gather your documents and begin the loan application process. Documents may include:

• Your employer’s information

• Your financial information (checking/savings account balances and numbers)

• Your tax documents

• Your pay stubs

• Your Social Security number

• Documents supporting your need for the loan (e.g., medical bills, home renovation estimates, car quotes)

3. Submit application(s). Once you e-sign the application, you give the lender permission to check your credit and verify your information. This may trigger a hard credit inquiry, which may take 5-10 points off your credit score.

Lenders may ask for additional documents as well, so be prepared to scan and email them to expedite your approval process.

Personal loans online typically get money to you quickly, sometimes within 24 hours. Check with your lender about payment options such as automatic debits from your bank account, which may help streamline the payment process.

Questions to Ask Before Applying for a Personal Loan

Whether or not to apply for a personal loan is a significant decision that may affect your future finances. 

Before you apply for a personal loan, ask the following questions to ensure that you’re making the right choice for your situation.

1. Can I responsibly take on the debt of a personal loan?

Taking on debt may be life-changing, so make sure you’re doing it for the right reasons. Getting a personal loan could help with necessary costs, such as home repairs or medical expenses. If you want to make an optional purchase, such as a vacation, you might want to consider saving up for it or seeking out alternatives that don’t affect your DTI ratio.

2. Are there additional fees?

Some banks and online lenders may require origination fees or other upfront costs that you may not initially know about. When comparing lenders, it’s crucial that you ask about any additional fees so you’re able to budget and plan your finances accurately. 

3. Does the loan have prepayment penalties?

Sometimes, it may be possible to pay off your personal loan before the end of the term. While this may save you money on interest, some lenders penalize borrowers for early repayment. If you plan to pay off the loan early, check with lenders to confirm what, if any, penalties they charge.

4. What should I know about interest rates?

APRs for personal loans are largely determined by your credit score, although it depends on the lender. Your annual income and the amount you wish to borrow are important, too, among other personal financial factors that also vary from lender to lender.

5. Any tips or tricks I should know while shopping rates?

It’s a good idea to compare personal loan rates from different lenders to identify a favorable deal. If you’re not seeing the rate you want, try lowering the amount you want to borrow or building your credit score.

6. Is there a cap on the variable interest rate?

If you choose a personal loan with a variable interest rate, ask the lender if there’s a cap and what it is. When you’re trying to decide between a fixed- or variable-rate loan, it may help to know how much your monthly payments could fluctuate with a variable rate. If there isn’t a cap, you could end up paying more in interest, depending on the index/benchmark.

7. Is the interest rate too good to be true?

It’s important to compare personal loans online to identify funding with favorable rates. But remember, advertised rates may reflect the rates offered to borrowers with the strongest credit scores and income, typically reserved for highly qualified applicants.

Alternatives to Personal Loans

While personal loans may be a great option for short-term expenses and necessary purchases, you may identify other sources of financing better suited to your specific needs. Here are a few alternatives to consider.

1. Personal Line of Credit

Personal lines of credit are a type of revolving credit that functions more like credit cards than personal loans. A line of credit allows you to spend up to a certain amount, providing funds as needed. You pay interest only on what you borrow, not on the entire credit line, and you make monthly payments based on how much credit you’ve used. 

A line of credit may be useful for both ongoing expenses and large, one-time funding needs. Personal lines of credit usually allow for cash advances on the full credit limit, which may help if you run into a situation where you need a lot of cash in a pinch.

Small businesses may benefit from having a line of credit to pay for expenses, such as daily purchases and unexpected repairs. A line of credit may also be useful for homeowners who want funds for home repairs or renovations but don’t want to take out a personal loan.

Lines of credit are typically unsecured (i.e., they don’t require collateral), which may mean potentially higher interest rates. A secured personal line of credit reduces risk to the lender, meaning that interest rates may be lower. 

If you pay your balance regularly, you may avoid costly interest payments, making a line of credit a potentially useful form of flexible financing.

2. Payday Loans

Payday loans are small, short-term loans that borrowers are supposed to repay in full upon receiving their next paycheck. These loans may be risky because they typically carry very high interest rates that dramatically inflate the cost of the loan. 

Loan amounts are typically $500 or less, depending on the lender, the state you live in, and your ability to pay back the loan. Lenders usually only require an active bank account, identification, and proof of income for eligibility.

While payday loans might be useful as a last resort for unexpected expenses, because of their high interest rates, they’re typically not advisable. Payday loans may get borrowers into a deeper cycle of debt due to their high borrowing costs and short terms, and they’re considered to be a predatory form of financing. 

3. Credit Cards

Credit cards may be a form of financing for small, unexpected purchases, especially if you’re able to pay the balance each month. 

Because credit cards are usually unsecured (they don’t require collateral), interest rates are typically quite high, making for expensive monthly payments if you carry a balance from month to month. If you pay the balance in full each month, you won’t incur interest.

Some companies offer incentives and rewards, such as airline miles and points toward future purchases, for making purchases and paying your bill. There may also be introductory 0.00% APRs for a specified period of time, allowing you to use the card without incurring interest if the balance is paid off within that time frame.

Always read credit card terms and conditions carefully, as some companies may have high penalties for late payment and/or charge an annual fee.

The Takeaway

When considering a personal loan, the key is to do your homework and make a responsible choice. First, check your credit and know your debt-to-income ratio. This helps determine what you may qualify for. Next, compare different loan types, such as fixed-rate vs. variable-rate or secured vs. unsecured, from various lenders. Always ask about extra fees and prepayment penalties to avoid surprises. Whether you apply online for speed or prefer a bank for potentially better terms, choose the option that fits your financial goals and provides an affordable way to handle the debt.

LNTPL-Q226-025