The Most Common Personal Loan Questions—Answered
Personal loans can be a smart way to manage debt, cover emergency expenses, or fund major purchases. But before applying, it’s essential to understand how they work. This guide answers the most common personal loan questions, including how to get approved, how they work, and how to find the best loan for your situation.
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What Is a Personal Loan?
A personal loan is a fixed-term, fixed-payment loan that allows you to borrow a lump sum and repay it over time with regular monthly payments. These loans are often unsecured, meaning you don’t need collateral like a house or vehicle to qualify.
Common Uses for Personal Loans
- Debt consolidation
- Emergency expenses
- Home improvements
- Medical bills
- Major purchases
Secured personal loans (backed by collateral) may offer lower interest rates, but carry the risk of losing your asset if you fail to repay.
How Do Personal Loans Work?
When you take out a personal loan, you receive a one-time lump sum from a lender. You repay the loan over a set repayment term, usually between 12 and 60 months, with fixed monthly payments.
Each payment includes:
- A portion of the principal (the amount you borrowed)
- Interest, which is the cost of borrowing
Your interest rate and loan term are locked in at the time of agreement. Unlike credit cards or lines of credit, personal loans are not revolving—once you repay the loan, the account is closed.
How to Get Approved for a Personal Loan
To qualify for a personal loan, lenders evaluate several key factors:
What Lenders Look For:
- Credit history and payment behavior
- Income and employment stability
- Debt-to-income ratio
- Loan amount requested
- Collateral or cosigner (optional)
Tips to Improve Approval Odds:
- Apply with a creditworthy cosigner
- Consider a secured personal loan
- Reduce existing debt before applying
- Verify stable income sources
Even if your credit score isn’t perfect, showing that you can repay the loan responsibly may improve your chances.
How to Get a Personal Loan with Bad Credit
If you have bad credit, getting approved for a personal loan can be more difficult—but it’s not impossible.
Options for Bad Credit Borrowers:
- Look for lenders that specialize in subprime loans
- Consider secured personal loans
- Add a cosigner with good credit
- Apply through a loan marketplace to compare offers
Expect higher interest rates if your credit score is low. That’s because lenders use high rates to offset risk. If you’re confident you can repay quickly, the extra cost might be worth it.
Can You Refinance a Personal Loan?
Yes, many lenders allow you to refinance a personal loan.
Benefits of Refinancing:
- Lower your interest rate
- Reduce your monthly payments
- Extend or shorten your loan term
- Combine multiple loans into one
Pro Tip: Refinancing only makes sense if you’re getting a significantly better rate or terms. Otherwise, extending your loan term could cost more in the long run.
How to Apply for a Personal Loan
Getting a personal loan is easier than ever—especially online.
Steps to Apply:
- Check your credit score
- Compare loan offers through marketplaces like The Yukon Project
- Fill out a prequalification form
- Complete a full application with your ID, income verification, and bank details
- Accept the loan terms and receive funds, often by the next business day
Most lenders perform a soft credit check during prequalification, which doesn’t affect your credit score.
Where Can You Get a Personal Loan?
You have several options when looking for a personal loan, including:
Types of Personal Loan Lenders:
- Banks: Ideal if you have an existing account, but not all offer personal loans.
- Credit Unions: Typically offer lower rates, but you must be a member.
- Online lenders/FinTechs: Convenient, fast approval, broad range of borrowers.
- Lending marketplaces: Compare multiple offers in one place.
At The Yukon Project, our personal loan marketplace lets you check your rate with up to 40 lenders using just a soft credit check.
What Banks Offer Personal Loans?
Not every bank offers personal loans, but here are a few that do:
- Wells Fargo
- Discover
- Citibank
- Fifth Third Bank
- PNC Bank
- U.S. Bank
Each lender has different qualification requirements, interest rates, and terms. Always compare multiple offers to get the best personal loan for your situation.
Where Is the Best Place to Get a Personal Loan?
The best personal loan is the one that meets your needs at the lowest cost.
What to Look For:
- Lowest interest rate
- No prepayment penalties
- Reasonable repayment terms
- Transparent fees
To find the best place to get a personal loan, consider using a lending marketplace. At The Yukon Project, we partner with top lenders to offer competitive personal loan offers based on your credit profile—all without hurting your credit score.
Final Thoughts on Personal Loans
Personal loans can be a helpful financial tool—whether you’re consolidating debt, covering emergencies, or funding a big expense. But it’s essential to shop around, compare offers, and choose a loan that fits your budget and financial goals.
