A personal loan is a type of unsecured loan provided by banks, credit unions, online lenders, or other financial institutions to individuals for various personal purposes. Unlike specific-purpose loans (e.g., auto loans or mortgages), a personal loan allows borrowers to use the funds for almost any personal financial need or expense, such as debt consolidation, medical bills, home improvements, travel, education expenses, or wedding costs.

• Unsecured: Personal loans are unsecured, meaning they do not require collateral. Borrowers are not required to pledge any assets (e.g., a house or car) as security for the loan.
• Fixed Loan Amount: The lender approves a fixed loan amount based on the borrower’s creditworthiness, income, and other factors. The borrower receives the entire amount upfront and repays it over time.
• Fixed Interest Rates: Personal loans typically come with fixed interest rates, meaning the interest rate remains constant throughout the loan term. This allows borrowers to have predictable monthly payments.
• ‘Fixed Repayment Terms: The loan is repaid through regular fixed installments over a predetermined period, which could range from a few months to several years.
• Credit Requirements: Lenders assess the creditworthiness of the borrower before approving a personal loan. A good credit history usually leads to more favorable loan terms, while a lower credit score may result in higher interest rates or loan denial.
• Application Process: To apply for a personal loan, the borrower needs to provide personal and financial information to the lender, including income verification, employment details, and other relevant documents.
• No Restrictions on Use: Once approved, the borrower has the freedom to use the funds for any personal purpose without restrictions from the lender.