How a Personal Loan Works

What is a personal loan and how does it work?

A personal loan, or signature loan as it was once referred to, is typically an unsecured loan, meaning that you simply sign your name and the money is yours.  You do not have to post any type of collateral, such as the title to your car or the deed to your home. Unlike a home mortgage or automobile loan, there are generally no limitations placed on how you spend the money that you’ve borrowed, meaning you can use it for larger home purchases (new furniture, carpet, etc.), car repairs, debt consolidation, Christmas shopping, or even that tropical vacation you so desperately want to take!

Personal loans are an excellent way to borrow money if your creditworthiness is such that you can gain the approval needed to borrow the sum of money for which you have applied. Once you have been approved and actually receive the funds from the lender, you will be required to pay the total amount of the loan back, with interest and any applicable loan fees, usually in regular installment payments over a period of time. Since the loan amount, interest rate, and fees can vary widely from lender to lender, it’s wise to do your homework and shop around for the best deal.

At, we recommend personal loans – not only do they offer some of the options around, but checking to see if you qualify usually won’t hurt your credit score!