Is a Personal Loan Right for You?

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Student Loan Hero Advertiser Disclosure

Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print to help you understand what you are buying. Be sure to consult with a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time.

Editorial Note: This content is not provided or commissioned by any financial institution. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by the financial institution.

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For student loan borrowers with high-interest debt, refinancing may be a good option to save money on interest. But if you’re also battling credit card debt, student loan interest rates might be the least of your problems. Credit card interest rates can vary widely, but they can easily be in the double digit —close to 20 percent.

If you are battling credit card debt, there is an alternative that can help save you money on interest and consolidate your loans: a personal loan.

What is a personal loan?

Personal loans, also known as unsecured loans, can help you fund a large expense or consolidate debt without requiring the use of collateral. This is different from a secured loan, where you might use your car or house as collateral for the loan. In the event of default, lenders can use collateral to recoup their money (for example, by repossessing a car or, in the case of a house, foreclosure).

Because personal loans are unsecured and don’t require collateral, they typically have higher interest rates than secured loans. However, personal loans offer much better interest rates than a credit card. Depending on your creditworthiness, you may be able to get an affordable interest rate.

When should you use a personal loan?

A personal loan can be used for a variety of things—unlike a student loan or a mortgage, a personal loan can be used for personal reasons at your discretion. Personal loans can offer access to capital, but they vary widely from something like a payday loan.

A payday loan is generally for short-term fixes. The money is available quickly, and the repayment terms have sky-high interest rates. By contrast, personal loans are generally used for long-term purchases, like debt consolidation or home repair, and they have much lower interest rates, making them an attractive option for those needing substantial capital.

But in the end, a personal loan is still a form of debt and should be used carefully. It shouldn’t be used to fund that dream vacation or a wedding (though research on the web will tell you otherwise). Saving up cash for those purchases is a much smarter option.

One of the best ways to use a personal loan is to consolidate high-interest credit card debt. Some credit cards have sky-high interest rates ranging from 10 to 20 percent or more.

Depending on your credit, you could get a personal loan for as low as 4.04%, pay off your credit cards, and have a new loan at a much lower interest rate. Considering that the average household has $7,281 in credit card debt, that could amount to a huge savings in interest.

Let’s say you have $10,000 in credit card debt at an 18% interest rate. If you consolidate with a personal loan of $10,000 at a 7% interest rate, over a repayment term of 24 months you could save $1,236 in interest.

Certified Financial Planner and financial coach Adam Hagerman says, “The majority of personal, unsecured loans I see are for debt consolidation. In my opinion, it’s one of the only reasons to consider a personal loan.”

While Hagerman believes a personal loan can be a good idea for debt consolidation, he also recommends looking at how you got into debt in the first place so you can treat the root cause of the problem. While it may seem like a personal loan is a great way to pay off credit card debt, you’re still taking on debt to pay off debt.

It’s crucial to understand why you got into debt. Was it a spending issue? A cash flow issue? Or an income issue? By tracking your income and expenses, you can identify the root cause so you extricate yourself from consumer debt.

Which banks offer personal loans?

If you’re thinking of taking out a personal loan to consolidate credit card debt, be sure to do your research on the terms of the loans as well as the interest rates. The interest rate you are offered will vary depending on your credit score and income. Obviously, you want to get a much better rate than your credit card in order to save on interest. Here a few companies that offer personal loans.

1. Upstart

Like Earnest, Upstart also has a flexible underwriting process that considers education, income and job history along with credit history. It can be a great choice for smaller loans, too.

  • Loan amounts from $5,000 to $30,000
  • Minimum FICO score required: 620
  • Flexible underwriting and credit requirements
  • Fast application process

Visit Upstart

2. SoFi

SoFi, which began as a student loan refinancing company, has recently started offering personal loans as well, with some of the best rates in the industry.

  • No hidden fees
  • Has repayment terms of 24 to 84 months
  • You can borrow between $5,000 and $100,000
  • No minimum FICO score, but typically requires 680+
  • Offers unemployment protection so if you lose your job, you can postpone your payments.

Visit SoFi

3. Payoff

Payoff is a financial empowerment company designing products to help people make smart decisions about spending and saving. Their flagship product, the Payoff Loan™, empowers Payoff Members to pay off high-interest credit card balances at a lower rate and in a shorter term. They simplify the process so you get out of debt faster and save money.

  • Loan amounts: $5,000 to $35,000
  • Minimum FICO score required: 640
  • No application, prepayment, or late fees
  • Offers repayment terms of 24 and 60 months
  • The Member Experience Team answers questions and empowers Members toward financial success.
  • Starting an application won’t affect your credit score

Visit Payoff

4. LendingClub

  • Borrow from $1,000 to $40,000
  • Variable APRs from 10.68%. Best variable APR is available to borrowers with excellent credit.
  • Flexible Loan Terms.
  • Fixed Rates and Payments – Your payment will not change for the life of your loan.
  • No Prepayment Penalties – Pay off your loan at any time without fees.
  • Simple and Secure – Check your rate without hurting your credit score.
  • Fast – Apply in minutes and receive your money in as few as 5 days.
  • No Hidden Fees
  • No Collateral Required
  • Good Credit Required

Visit LendingClub

5. Earnest

Earnest is an online lender that offers personal loans with a flexible underwriting process. In addition to having no minimum FICO score, they also consider factors like savings, income, and earnings potential to determine loan approvals and offers.

  • Loan amounts from $5,000 to $75,000
  • No minimum required FICO score
  • Response to loan application in about 2 days
  • No fees, hidden or otherwise
  • Interest rate discount with autopay

A personal loan can be a valuable tool for paying off high-interest debt, but make sure it’s beneficial for you and saves you money in the long run. If you are thinking of using a personal loan for anything else, consider budgeting and saving for it instead.

Interested in a personal loan?

LendingTree allows you to compare rates from multiple lenders by filling out one easy form. Advertiser Disclosure

Student Loan Hero Advertiser Disclosure

Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print to help you understand what you are buying. Be sure to consult with a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time.

Advertiser Disclosure

Student Loan Hero Advertiser Disclosure

Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print to help you understand what you are buying. Be sure to consult with a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time.

RATES (APR)loan amount
5.99% – 18.82%1 $5,000 to $100,000
7.00% – 35.99% $5,000 to $30,000
7.99% – 35.97%* $1,000 to $35,000
99.00% – 199.00%2 $500 to $4,000
5.99% – 24.99%3 $5,000 to $35,000
7.99% – 29.99%4 $7,500 to $40,000
compare rates on Lendingtree now
NMLS #1136: Terms & Conditions Apply
1 Includes AutoPay discount. Important Disclosures for SoFi.

SoFi Disclosures

  1. Fixed rates from 5.99% APR to 18.82% APR (with AutoPay). SoFi rate ranges are current as of March 19, 2020 and are subject to change without notice. Not all rates and amounts available in all states. See Personal Loan eligibility details. Not all applicants qualify for the lowest rate. If approved for a loan, to qualify for the lowest rate, you must have a responsible financial history and meet other conditions. Your actual rate will be within the range of rates listed above and will depend on a variety of factors, including evaluation of your creditworthiness, years of professional experience, income and other factors. See APR examples and terms. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account.
  2. To check the rates and terms you qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull.
    See Consumer Licenses.
  3. Minimum Credit Score: Not all applicants who meet SoFi’s minimum credit score requirements are approved for a personal loan. In addition to meeting SoFi’s minimum eligibility criteria, applicants must also meet other credit and underwriting requirements to qualify.
  4. If you lose your job through no fault of your own, you may apply for Unemployment Protection. SoFi will suspend your monthly SoFi loan payments and provide job placement assistance during your forbearance period. Interest will continue to accrue and will be added to your principal balance at the end of each forbearance period, to the extent permitted by applicable law. Benefits are offered in three month increments, and capped at 12 months, in aggregate, over the life of the loan. To be eligible for this assistance you must provide proof that you have applied for and are eligible for unemployment compensation, and you must actively work with our Career Advisory Group to look for new employment. If the loan is co-signed the unemployment protection applies where both the borrower and cosigner lose their job and meet conditions.
  5. Terms and Conditions Apply: SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet SoFi’s underwriting requirements. Not all borrowers receive the lowest rate. To qualify for the lowest rate, you must have a responsible financial history and meet other conditions. If approved, your actual rate will be within the range of rates listed above and will depend on a variety of factors, including term of loan, a responsible financial history, years of experience, income and other factors. Rates and Terms are subject to change at anytime without notice and are subject to state restrictions. SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. Licensed by the Department of Business Oversight under the California Financing Law License No. 6054612. SoFi loans are originated by SoFi Lending Corp., NMLS # 1121636. (www.nmlsconsumeraccess.org)
2 Includes AutoPay discount. Important Disclosures for Opploans.

Opploans Disclosures

Direct Deposit required for payroll.

Opploans currently operates in these states: . *Approval may take longer if additional verification documents are requested. Not all loan requests are approved. Approval and loan terms vary based on credit determination and state law. Applications processed and approved before 7:30 p.m. ET Monday-Friday are typically funded the next business day.

  1. To qualify, a borrower must (i) be a U.S. citizen or permanent resident; (ii) reside in a state where OppLoans operates; (iii) have direct deposit; (iv) meet income requirements; (v) be 18 years of age (19 in Alabama); and, (vi) meet verification standards.
  2. NV Residents: The use of high-interest loans services should be used for short-term financial needs only and not as a long-term financial solution. Customers with credit difficulties should seek credit counseling before entering into any loan transaction.

  3. OppLoans performs no credit checks through the three major credit bureaus Experian, Equifax, or TransUnion. Applicants’ credit scores are provided by Clarity Services, Inc., a credit reporting agency.

  4. Based on customer service ratings on Google and Facebook. Testimonials reflect the individual’s opinion and may not be illustrative of all individual experiences with OppLoans. Check loan reviews.

  5.  

    Rates and terms vary by state.

3 Includes AutoPay discount. Important Disclosures for Payoff.

Payoff Disclosures

  1. All loans are subject to credit review and approval. Your actual rate depends upon credit score, loan amount, loan term, credit usage and history. Currently loans are not offered in: MA, MS, NE, NV, OH, and WV.
4 Important Disclosures for FreedomPlus.

FreedomPlus Disclosures

  1. The loan terms presented are not guaranteed and APRs presented are estimates only. To obtain a loan you must submit additional information and documentation and all loans are subject to credit review and our approval process. The range of APRs is 7.99% to 29.99% and your actual APR will depend upon factors including your credit score, usage and history, the requested loan amount, the stated loan purpose, and the term of the requested loan. To qualify for a 7.99% APR loan, a borrower will need excellent credit on a loan for an amount less than $12,000.00, and with a term equal to 24 months. Adding a co-borrower with sufficient income; using at least eighty-five percent (85%) of the loan proceeds to directly pay off qualifying existing debt; or showing proof of sufficient retirement savings, could help you also qualify for the lowest rate available. All loans are made by Cross River Bank and MetaBank®, N.A., Members FDIC.
* Important Disclosures for Upgrade Bank.

Upgrade Bank Disclosures

Personal loans made through Upgrade feature APRs of 7.99%-35.97%. All personal loans have a 2.9% to 8% origination fee, which is deducted from the loan proceeds. Lowest rates require Autopay and paying off a portion of existing debt directly. For example, if you receive a $10,000 loan with a 36-month term and a 17.98% APR (which includes a 14.32% yearly interest rate and a 5% one-time origination fee), you would receive $9,500 in your account and would have a required monthly payment of $343.33. Over the life of the loan, your payments would total $12,359.97. The APR on your loan may be higher or lower and your loan offers may not have multiple term lengths available. Actual rate depends on credit score, credit usage history, loan term, and other factors. Late payments or subsequent charges and fees may increase the cost of your fixed rate loan. There is no fee or penalty for repaying a loan early. Personal loans issued by Upgrade’s lending partners. Information on Upgrade’s lending partners can be found at https://www.upgrade.com/lending-partners/.