Personal Loans Guide 101: Everything You Need to Know

Hi, I’m Brian Meiggs, founder of My Millennial Guide. Over the years, I’ve learned a lot about personal finance, and I’ve seen how a well-timed personal loan can make a difference in someone’s financial journey.

Whether you’re looking to consolidate debt, cover an unexpected expense, or fund a big project, personal loans can be a useful tool—when used wisely.

In this guide, I’ll break down everything you need to know about personal loans, so you can decide if they’re the right fit for your situation. Let’s dive in.

Personal Loans Guide 101

What Is a Personal Loan?

A personal loan is a flexible financial product that gives you a lump sum of money upfront, which you then pay back in fixed monthly installments over a set period.

Unlike a mortgage or car loan, personal loans are typically unsecured, meaning you don’t need to put up collateral like your home or vehicle. Instead, lenders look at your credit score, income, and debt-to-income ratio to determine your eligibility.

Here’s the best part: you can use a personal loan for almost anything. Whether you want to consolidate high-interest debt, fund a wedding, or handle unexpected medical expenses, personal loans offer a lot of flexibility.

How Personal Loans Work

Let me walk you through how personal loans work, step by step:

1. Application: You apply with a lender (bank, credit union, or online platform) by providing basic information about your income, employment, and credit history. Some lenders (like the ones here) offer prequalification tools, so you can check your rates without affecting your credit score.
2. Approval: Once approved, you’ll receive the loan terms, including the amount, interest rate, repayment schedule, and any fees. Review these terms carefully before signing the agreement.
3. Funding: After you agree to the terms, the lender deposits the loan amount directly into your bank account. Some lenders process this within a day, while others may take a few business days.
4. Repayment: You’ll start repaying the loan in fixed monthly installments, which include both the principal and interest. Most lenders offer terms ranging from 12 to 60 months.

Why Consider a Personal Loan?

I’ve talked to many people who hesitate to take out a personal loan because of the stigma attached to borrowing money.

But here’s the thing: personal loans can actually be a smart financial move in the right situations.

Here are a few scenarios where they make sense:

• Debt Consolidation: Combining high-interest debts (like credit cards) into one loan with a lower interest rate can save you money and simplify your payments. Sometimes this is a good idea, which I get into this guide here.
• Emergency Expenses: Life happens. Medical bills, car repairs, or urgent home repairs can catch anyone off guard. A personal loan can provide the funds you need without maxing out a credit card.
• Big-Ticket Purchases: Whether it’s a wedding, home renovation, or starting a side hustle, personal loans can help you fund life’s big milestones.

My Experience with Personal Loans

I’ve personally used personal loans in the past, and here’s my honest take: they’re not for everyone.

When I was starting My Millennial Guide, I used a personal loan to consolidate some high-interest credit card debt. It gave me a lower interest rate, predictable payments, and the financial breathing room I needed to focus on growing my business.

That said, personal loans require discipline. If you’re not careful, they can lead to more debt instead of solving your financial problems.

The Pros and Cons of Personal Loans

Here’s a quick breakdown of the benefits and potential drawbacks:

Pros

• Versatility: Use the money for almost anything.
• Predictable Payments: Fixed monthly payments make budgeting easier.
• Potential Savings: Lower interest rates compared to credit cards (if you have good credit).

Cons

• Fees: Some lenders charge origination or prepayment fees.
• High Rates for Poor Credit: If your credit score isn’t great, you might end up paying more in interest.
• Debt Risk: Misusing personal loans can lead to financial trouble.

How to Qualify for a Personal Loan

When it comes to qualifying for a personal loan, preparation is key. Here’s what lenders typically look for:

1. Credit Score: A score of 670 or higher will get you the best rates. If your score is lower, you may still qualify but expect a higher rate.
2. Debt-to-Income Ratio (DTI): Lenders prefer a DTI below 35%. If your debt eats up more than 50% of your income, you may have a harder time getting approved.
3. Stable Income: A steady paycheck reassures lenders you’ll be able to make your monthly payments. Self-employed? Be prepared to show tax returns or bank statements as proof of income.
4. Compare Lenders: Shopping around is non-negotiable. Use our widget below to see some of our top picks for personal loan lenders based on your credit.

For excellent credit Our Rating: 5.0 I have excellent credit →	💸 Earn a $300 bonus after your loan funds. APR Range: 8.99% to 29.99% (with all discounts applied) Loan Amounts: $5,000 to $100,000 Repayment Terms: 2 to 7 years Fees: Origination fees up to 7% Funding Time: Most loans funded same or next day Credit Score Requirement: Minimum 680
For good credit Our Rating: 4.7 I have good credit →	Low-interest personal loans with fast funding for debt consolidation or major expenses. APR Range: 5.94% to 35.47% Loan Amounts: $1,000 to $50,000 Repayment Terms: 3 to 5 years Fees: Origination fees apply Funding Time: Same-day funding available Credit Score Requirement: Minimum 560
For poor credit Our Rating: 4.9 I have poor credit →	Uses AI to provide personalized loan options, even for those with limited credit history. APR Range: 7.80% to 35.99% Loan Amounts: $1,000 to $50,000 Repayment Terms: 3 or 5 years Fees: Origination fees up to 10% Funding Time: Most loans funded within 24 hours Credit Score Requirement: No minimum; considers factors beyond credit score
For no credit Our Rating: 4.0 I have no credit →	Connects you to lenders offering up to $15,000 with same-day approvals. APR Range: Varies by lender Loan Amounts: $100 to $15,000 Repayment Terms: Varies by lender Fees: Varies by lender Funding Time: As soon as the next business day Credit Score Requirement: Varies by lender

For excellent credit

Our Rating:

5.0

I have excellent credit →

💸 Earn a $300 bonus after your loan funds.

• APR Range: 8.99% to 29.99% (with all discounts applied)
• Loan Amounts: $5,000 to $100,000
• Repayment Terms: 2 to 7 years
• Fees: Origination fees up to 7%
• Funding Time: Most loans funded same or next day
• Credit Score Requirement: Minimum 680

For good credit

Our Rating:

4.7

I have good credit →

Low-interest personal loans with fast funding for debt consolidation or major expenses.

• APR Range: 5.94% to 35.47%
• Loan Amounts: $1,000 to $50,000
• Repayment Terms: 3 to 5 years
• Fees: Origination fees apply
• Funding Time: Same-day funding available
• Credit Score Requirement: Minimum 560

For poor credit

Our Rating:

4.9

I have poor credit →

Uses AI to provide personalized loan options, even for those with limited credit history.

• APR Range: 7.80% to 35.99%
• Loan Amounts: $1,000 to $50,000
• Repayment Terms: 3 or 5 years
• Fees: Origination fees up to 10%
• Funding Time: Most loans funded within 24 hours
• Credit Score Requirement: No minimum; considers factors beyond credit score

For no credit

Our Rating:

4.0

I have no credit →

Connects you to lenders offering up to $15,000 with same-day approvals.

• APR Range: Varies by lender
• Loan Amounts: $100 to $15,000
• Repayment Terms: Varies by lender
• Fees: Varies by lender
• Funding Time: As soon as the next business day
• Credit Score Requirement: Varies by lender

Tips from Brian for Choosing the Right Loan

If you’re considering a personal loan, here are some tips to make sure you choose the best option:

• Don’t Focus Solely on Interest Rates: While a low rate is important, look at the full picture, including fees and repayment terms.
• Read the Fine Print: Some lenders charge prepayment penalties or late fees. Make sure you know what you’re signing up for.
• Use a Loan Calculator: Tools like the one on My Millennial Guide can help you estimate your monthly payments and total interest costs.

Final Thoughts

Personal loans aren’t good or bad—they’re simply a financial tool. The key is understanding how to use them wisely. If you’re considering a loan, take the time to assess your financial situation, shop around for the best rates, and read the fine print.

At the end of the day, the goal is to make a decision that aligns with your long-term financial goals. If you need more guidance, check out other resources on My Millennial Guide. I’m here to help you make smarter money decisions and achieve financial freedom.