Personal Loans

by UnidosFebruary 13, 2020

Whether you’ve experienced a sudden emergency or need extra cash for an upcoming vacation, personal loans can help.

A personal loan is money lent by a financial institution like a bank, credit union, or other credit issuer and can be used for pretty much anything. It has a fixed interest rate (APR) and must be repaid over a specified period of time.

The majority of personal loans are unsecured, meaning they aren’t backed by collateral, like your home or vehicle. Since this is riskier for the lender, they’ll focus on things like your credit score/history, income, and even employment when deciding to approve you for a loan.

How it works

The first step is to submit your personal loan application. Many lenders today will let you do this online, but you can also do it in person if working with a bank. Most lenders will also allow you to submit a preliminary application, which includes some basic details, like your name and contact information, your income, and your credit score to get you some quick quotes.

The complete application will include more personal details and require you to submit documents, like pay stubs and bank statements.

Credit Pull

While preliminary applications typically run a soft credit check which won’t appear on your credit report, a complete application will run a hard credit check which can negatively impact your credit score, but only temporarily.

If you’re just trying to round up some quick quotes from a variety of lenders to compare rates, be sure the preliminary application you submit does not make a hard inquiry—lenders are required to tell you whether it’s a soft or hard credit check when applying.

Loan Size

The size of the personal loan depends on the lender. Some lenders offer loans as small as $500 and others offer loans as big as $500,000, but they typically range from $1,000 to $50,000. The amount of the loan also depends on your credit profile, which is made up of your credit score, credit history, how much debt you currently have, income, and employment.

Loan Term

The loan term is the repayment period of the loan, which typically ranges from 12 months to 60 months. Some people prefer a longer loan term to make their monthly payments smaller, and others prefer a shorter loan term so they pay less in interest over the life of the loan.

Interest Rate

When you borrow money, you have to pay the money back plus interest. The interest rate is that extra amount you’ll have to pay each month until the end of your loan term. When comparing lenders, the interest rate is what you want to look at to see how expensive the loan will be.

Additional Fees?

When considering a personal loan offer, always check for additional fees. Some loans will have a prepayment fee, which is a fee you’ll get if you pay the loan off early. Another common fee is an origination fee, which is the cost of processing your loan application.

Some lenders will charge additional fees, so be careful and always read the fine print!

Should I get One?

While taking on debt always comes with risks, like hurting your credit score, if you’re late on a payment, a personal loan can help build your credit profile if done smartly.

While we don’t recommend taking one out to finance things like vacations or a shopping spree, a personal loan is a great idea when consolidating debt, refinancing, and making large purchases, like a vehicle.

The key is to stay on top of your payments and manage your loan responsibly. Forgetting about your loan and not making payments could result in fees and interest hikes, which will only increase your debt.

What Do I Need in Order to Get One?

The main types of information a lender will need when approving a personal loan are the following:

  • Proof of identity, like a driver’s license or social security card
  • Proof of address, like a utility bill or voter registration
  • Verification of income, like a pay stub or tax form

In addition to these, lenders will also check that you have enough cash flow for a loan by looking at your current debt as well as credit history.


If your personal loan payment is late by 30 to 90 days, it’s considered default (though the timing depends on the lender). If you’re just a few days late, your loan is considered delinquent. Either way, neither of these are good and can result in a drop in your credit score.

Once a loan is default, lenders will often sell the loan balance to debt collection agencies which will result in a barrage of phone calls, emails, and even text messages from the agency in an attempt to collect.

A lender or debt collector can seek repayment by taking you to court.


If used correctly, a personal loan is a great way to receive quick funding. With that said, there are alternatives.

Credit cards are another viable option if you need access to cash. With a credit card, you need to pay back the full balance by the due date or else pay interest, which can be high.

A secured loan is one that is backed by collateral. You can get much lower interest rates on a secured loan since the lender has less risk. If you default on your loan, the lender can recoup the money owed by seizing your assets. This, of course, places the risk on you, the borrower.

If you have trouble borrowing from traditional financial institutions, you may have luck securing a peer-to-peer loan, which lets you borrow from individuals and investors. There are online marketplaces that can connect you to a lender.


While there are a variety of ways to get access to quick cash, a personal loan is probably the best way. If you have a decent credit profile, you can get solid loan terms and low interest rates.

Now that you’re more familiar with personal loans and the process involved in getting one, the next step is to do your research and find the perfect lender.

Do you have more questions about personal loans? Do you want to share a good or bad experience with us? We love to hear from our friends, feel free to contact us at