Definition
An installment loan, usually unsecured, that you repay in fixed monthly payments over a set term, often two to seven years.
What it means
A personal loan gives you a lump sum that you repay in equal monthly payments. Most are unsecured, meaning no collateral, so the rate depends heavily on your credit score and income. Banks, credit unions and online lenders offer them for uses such as consolidating debt, medical bills or home repairs. Some lenders charge an origination fee taken out of the loan, which raises the APR. The Truth in Lending Act requires lenders to disclose the APR, finance charge and total of payments before you sign. Many lenders let you prequalify with a soft credit check to see a likely rate, followed by a hard inquiry when you apply. On-time payments can help your credit, while missed payments can lead to collections.
Example
A $10,000 personal loan at 11% for 3 years has a payment of about $327 and total interest of about $1,786. A 5% origination fee would mean receiving only $9,500.
Illustrative numbers only. Your situation will differ.