Investment Apps and Websites

Fifth Third Bank Personal Loans Review: Is It The Right Lender For You?

This Fifth Third Bank personal loans review will provide you essential information about the bank and how to get a personal loan from it. Who knows, after this, you might just realize you’ve already found the most ideal lending company for you.

Fifth Third Bank Personal Loans Review

In 2018, according to data published by (America’s Debt Help Organization), American household debt hit a record of $13.21 trillion. This debt was shared by about 300 million people in the country.

Meanwhile, in a report by CNBC online, it says that US personal loans per se increased to a record of $138 billion. The article states that fintech companies may have helped boost the increase in number. Of course, traditional banks and lending companies do share a lot as well.

The number of debts especially personal loans is expected to continue rising. Well, given the current situation in the country and all around the globe, it wouldn’t be surprising if, by the end of the year, the number of personal loans will hit another record.


Now, as the demand for loans increases, so are the number of lenders. In fact, there are so many financial institutions and lending companies (both online and traditional) out there that as a borrower, it could get a little overwhelming to choose one.

One of the options in a sea of lenders is the Fifth Third Bank, and as we have said earlier, this Fifth Third Bank personal loans review will specifically provide every potential borrower all the essential information they need to be able to come up with an informed decision.

Particularly, we are going to tackle the following:

  • Who is Fifth Third Bank?
  • Why consider getting a personal loan at Fifth Third Bank?
  • What kind of personal loans does Fifth Third Bank offer?
  • What do you need to know about Fifth Third Bank personal loans?
  • Who qualifies for a Fifth Third Bank personal loan?
  • How to apply for a Fifth Third Bank personal loan?
  • What are the pros and cons of Firth Bank personal loans?


Fifth Third Bank is the primary subsidiary of Fifth Third Bancorp, a diversified bank holding company in the United States. Fifth Third Bancorp, which was founded in 1858 is one of America’s Top-20 largest bank holding companies.

Although headquartered in Cincinnati, Ohio, Fifth Third Bank, which is classified as a community bank, is serving individuals, businesses, as well as communities in 10 states, through more than 1,200 full-service locations.

Similar to other community banks out there, Fifth Third Bank is committed to improving the lives of people living in local communities where they operate. They make it possible by offering financial products that fit every budget and lifestyle.

Fifth Third Bank offers both online and mobile banking services that provide access to banking accounts, view bank transactions, and deposit checks to name a few.

Meanwhile, when it comes to the products and services they offer, like any typical bank, Fifth Third Bank offers savings and checking accounts, loans, and more.

Today, though, as the title implies, we are specifically focusing on its personal loan products.

First Third Bank is an accredited business with the Better Business Bureau for years. Currently, it has an A+ BBB rating, which is the best rate possible.

Unfortunately, though, the bank’s customer reviews on the BBB website are less pleasing. On average, customers award it the minimum one star out of a possible five.

Before moving on, if you want to know more about how to hit an approval of your personal loan application, you may want to check this very informative video by Ajith Sharma. Check this out by clicking the play button below:


It is every borrower’s responsibility to see to it that the lender they are eyeing for meets their personal requirements. In the same way that banks also look into every borrower’s eligibility for a particular product or service.

Now, before we even talk about who qualifies for a personal loan at Fifth Third Bank, why consider Fifth Third Bank in the first place?

While we can share a number of reasons, allow us to focus on the following instead:

  1. It provides funding in near-instantly by allowing borrowers to access borrowed money within one business day.
  2. Unlike other lending companies, the bank does not charge origination or prepayment fees.
  3. It has quite reasonable and competitive annual percentage rates (APRs) that range between 6.99% and 19.24% depending on the state.
  4. The bank made it to the J.D. Power 2019 Personal Loan Satisfaction Study.
  5. It is present in over 1,000 branches across 10 states (Florida, Georgia, Illinois, Indiana, Kentucky, Michigan, North Carolina, Ohio, Tennessee, and West Virginia).

As we continue discussing, you will certainly know more about Fifth Third Bank and its personal loan services. More so, the more you get to learn about this bank and its personal loan options, the more you are likely to consider getting a loan from it.


Clients of Fifth Third Bank have to options for personal loans. These are Signature Loans and Secured Loans.

To learn more about the two, here’s a quick definition we got from Fifth Third Bank website:

Signature Loan

This type of loan is a simple and convenient way of getting money you need. The loan can be processed online, or through a mobile device.

By applying for a Signature Loan, you get to enjoy an instant decision to the status of your loan application, as well as the ability to access your funds within the next business day.

However, it is important to note that Signature Loan is exclusive for Fifth Third customers with an eligible checking or savings account only.


  • Loan amounts from $2,000-$25,000
  • Terms available: 12 – 60 months
  • Annual Percentage Rates range from 6.99% to 15.24%
  • No closing costs, prepayment or annual fee
  • Ability to select first payment date up to 45 days out

Secured Loan

By applying for a secured loan, you get to borrow you need now while letting your asset grow.

Similar to Signature Loan, this type of personal loan is available exclusively for Fifth Third customers with an eligible checking or savings account only.


  • Loan amounts from $2,000-$500,000
  • Between 50% to 100% of the collateral
  • Terms available: 12-60 months
  • Annual Percentage Rates range from 5.14% to 8.64%
  • No closing costs, prepayment or annual fee


Now, at this point in our Fifth Third Bank personal loan review, will discuss in detail. We are going to look into every single aspect that is vital for any borrower to come up with a decision – whether to apply for a personal loan at Fifth Third Bank or look for another financial or lending institution.

Some of the key details we are going to look into are as follows:

  • Loan Amount
  • Interest Rate
  • Loan Terms
  • Fees
  • Collateral
  • Funding
  • Deferment
  • Prequalifying Option
  • Co-Signers
  • Customer Service

Loan Amount

As mentioned, Fifth Third Bank has two types of personal loans to choose from – the Signature Loan and the Secured Loan.

For Signature Loan, the minimum loanable amount is $2,000, while the maximum amount you can borrow is $25,000.

Meanwhile, for those opting for a Secured Loan instead, you can borrow as low as $2,000 up to $500,000.

Interest Rate

Just the same, the annual percentage rate also varies depending on the type of personal loan you are applying for.

For Signature Loans, the APR ranges between 6.99% and 15.24%. As for Secured Loan, APR varies ranges 5.14% to 8.64%.

As mentioned earlier, the interest rate will depend on certain factors, particularly the state where you are from or are applying from. So, to be sure, make it a point to inquire in the nearest Fifth Third Bank or you may reach them at their phone number (which we will be provided later on).

Loan Terms

When it comes to loan terms or repayment terms, borrowers of either Signature Loan or Secured Loan do have the same options to choose from.

Either way, the loan terms available are 12, 24, 36, 48, or 60 months.

The same rules apply at Fifth Third Bank. The longer the terms is, they lower the monthly payments will be. However, that results to paying more interest.

Meanwhile, opting for shorter-term loans means higher monthly payment, but ultimately, it will save you money in the long run.

Thus, make sure to strike a balance between the two.


Another important thing that a borrower needs to look into before settling for a lender is to make sure he or she is fully aware of the fees. Unfortunately, there are lenders that do not explicitly inform borrowers of fees and charges.

Fortunately, Fifth Third Bank is very transparent when it comes to fees and charges. The bank does not charge closing costs, prepayment penalties, as well as annual fees.

While it is unclear how much or if the bank charges for insufficient funding, when it comes to late payments, they do charge a certain price, but that is only when you fail to pay after a 10-day grace period. Actual charge is not disclosed.


For Secured Loans, clients who are planning to borrow between $2,000 and $500,000, Fifth Third bank requires at least 50% collateral.


As mentioned earlier, Fifth Third Bank provides an easy and accessible loan processing. In fact, borrowers can have access to funds within the next business day.

Yes, that is how fast they can process loan applications – provided of course that you are eligible and are able to provide all the information they need to process your loan application and make a decision.


Another important feature that a borrower (especially those with a tight budget during the time of the loan) must look into is if the lender offers deferment.

Luckily, Fifth Third Bank offers a deferment option for Signature Loans. The borrower is given an option to defer the first payment date for up to 45 days. However, it is important to note that interest will still accrue.

Prequalifying Option

Unlike other financial institutions or lending companies, Fifth Third Bank does not have a prequalifying option, which means you have to apply instead of getting an upfront quote.

The thing about applications is that it can affect your credit score.

If you want to have an idea though, you can check the bank’s signature loan monthly payment calculator, which is available on their website.


While some lenders do allow co-signers, Fifth Third Bank does not specify a policy on co-signers. We assume, however, that should the bank allow it, the co-signer has to have an eligible existing account with the bank.

Customer Service

If you have questions, clarifications, or you know more about the bank’s products and services particularly its personal loan options, Fifth Third Bank can be contacted by sending an email, calling over the phone, or by setting an appointment at a branch near you.

For inquiries over the phone, you may call 1-800-972-3030 on Mondays through Fridays, 8 a.m. to 6 p.m. EST, and on Saturdays, 10 a.m. to 4 p.m. EST.


There are no upfront application requirements to be able to get a personal loan from Fifth Third Bank. Anyone can apply regardless if you already bank with Fifth Third or not. Your credit score does not matter, too. But of course, as a general rule, having good credit will surely help improve your chances of getting approved for a personal loan.

Ideally, your credit score must fall above 760 to be considered excellent. Meanwhile, credit scores that are above 700 are considered good, are likely to still be granted with personal loan approval.

Similar to most if not all lenders, when applying for a loan, you need to provide personal information like your existing assets and debts (if any). At the same time, provide verifiable income history. This information is vital for the bank to come up with a lending decision.

Although the bank allows the processing of loan applications online or via mobile, borrowers may also opt to apply personally in any Fifth Third Bank branch near them.

When you apply for a personal loan — whether it be Signature Loan or Secured Loan — make sure to have all the required information with you. Not having all of them may slow down the process.

Some of the common information you’ll be asked to provide include:

  • Name
  • Address
  • Date of birth
  • Proof of identity, such as a driver’s license
  • Social Security number
  • Annual income
  • Proof of income, such as bank statements or pay stubs
  • Verification of employment

Make sure also that all the documents you have are clear, accurate, and easy to understand. The goal is to leave a few questions to the loan officer.


Now that you already know what Fifth Third Bank is all about, its personal loan options, as well as other essential information a borrower must know, this time around, we are going to provide you with information on the loan application process.

This Fifth Third Bank personal loan review will not be complete without us sharing with you this equally important information — especially if by now you have already decided to pursue a personal loan application at Fifth Third Bank.

To apply for a personal loan, you have two options — either you go online or you visit a branch near you to process your loan application personally.

If you are opting to apply online, all you have to do is go to the Fifth Third Bank website. Then, navigate to the Personal Loans and Lines of Credit page. Choose whether you are opting for a Signature Loan or a Secured Loan, and then click “Apply Now”.

Automatically, you will be prompted to log in to your Fifth Third Bank account. You will then be asked to complete the whole loan application process and essentially, get an instant loan decision.

As we mentioned earlier, once approved, funds are deposited into your account the next business day.

Meanwhile, if you want the more traditional way, you may also do so. Just look for a Fifth Third Bank near your place, and call the branch to set an appointment.


At this point in our Fifth Third Bank personal loans review, we are going to share with you some of the pros and cons that we found about the bank.

Similar to other lending companies, Fifth Third Bank does have its share of good and bad as well. After all, there is no such thing as a perfect lending company, right?

So, here are what we found —


  • It provides two options for different types of customers.
  • It has a wide range of repayment terms.
  • Providing a rate discount is possible.
  • It does not charge an origination fee, prepayment penalty, or annual fee.
  • Borrowers can apply for a personal loan either online or personally at a Fifth Third Bank branch.
  • Usually, lending decisions are given near-instantly.
  • Funds are provided within one business day.


  • The interest rates are not the lowest in the industry.
  • The bank is only available in 10 states (although it has over 1,000 branches across all those states).
  • Personal loans are only available to existing customers with an eligible Fifth Third Bank checking or savings account in good order.


Overall, Fifth Third Bank is a promising option to get a personal loan from. It provides borrowers options on whether to go for an unsecured (Signature Loan) or secured loan.

Credibility-wise, with over 150 years of existence in the industry, the bank has definitely earned it.

So, do you think Fifth Third Bank is the right bank for you to apply for a personal loan from?

As you decide, just keep in mind all the essential information we provided in this Fifth Third Bank personal loans review. They sure are very helpful in making a decision.

Investment Apps and Websites

OneMain Financial Loans Review: Why Choose It Over Other Lenders?

If you are looking for a quick source for funds but you have less-than-perfect credit, then OneMain Financial might just be the one you are looking for. In this OneMain Financial loans review, we are going to provide you with significant information before you head on to its website and apply for a loan.

OneMain Financial Loans Review

In a report by the U.S. Chamber of Commerce, it says that the current total outstanding personal loan debt in the United States is estimated at $143 billion, while there are 21.1 million outstanding personal loans in the country to date.

Furthermore, in the said report, it says that the average interest rates for personal loans range from 10% up to 28% — depending on the borrower’s credit score. Generally, the better your credit score is, the lower the interest rates would be. Unfortunately, those with not-so-good credit score may have to deal with higher interest rates.

Personal loans, particularly the unsecured ones are very popular among borrowers. It’s in fact every borrower’s go-to loan type. It’s easy to apply, and the funds are usually made available in just a matter of time.


With everything that is happening around, it wouldn’t be surprising if there’d be a surge in personal loan (or any loan for that matter) applications. People need to thrive and with the recession just around the corner because of the pandemic, lending companies will surely have a lot of work to do.

Speaking of lending companies, there are a lot of financial institutions out there where people can borrow money from. There are banks, credit unions, as well as online lenders. With a lot of options available, it’s really just about choosing the right one.

One of the choices is OneMain Financial. Today, we are going to specifically talk about this company – what it is, what it offers and what it does, and of course, we are going to find out if it’s worth dealing with.

For your reference, here are the questions that we are going to answer to help you know more about OneMain Financial, and eventually, help you make an informed decision:

  • Who is OneMain Financial?
  • What are the different types of personal loans offered by OneMain Financial?
  • What are the features of OneMain Financial personal loans?
  • What do you need to know about OneMain Financial loans?
  • Who qualifies for OneMain Financial personal loans?
  • How to apply for OneMain Financial personal loans?
  • What are the pros and cons of OneMain Financial?


One thing that struck us about OneMain Financial is the fact that it sees every customer as one of a kind. The company believes that every borrower deserves not just any financial solution, but something that would work for him or her.

OneMain Financial, also known as Onemain Holdings, Inc. is an American financial services provider. Having been in the industry since 1912, it is not surprising that OneMain Financial has become the country’s largest lending-exclusive financial company.

Over the years in service, OneMain Financial has already served more than 10 million customers — provided them with personal loan options that come with the fast and easy application process. The company provides loan options that are usually used for home improvement, debt consolidation, major purchases, and many more.

Although headquartered in Evansville, Indiana, OneMain Financial has more than 1,500 branches across 44 states.

Before we move on with our own OneMain Financial loans review, we thought you might want to check the below review as well by ProudMoney. It’s an informative one, and definitely worth watching for.


Now that you already know who OneMain Financial is, needless to say, what it does, at this point, let us talk about the different types of personal loans offered by the company.

As mentioned earlier, OneMain Financial aims to provide financial services to its customers in a unique way — meaning, depending on the needs of the person. That is why it is not surprising that the lending company provides borrowers personal loan options intended for different reasons.

Although OneMain Financial does not let borrowers apply for a loan intended for post-secondary education or business expenses, it allows borrowers to use the money borrowed for a number of purposes, which include the following (and even more):

  • Home improvement
  • Debt consolidation
  • Recreational loans
  • Life events (such as emergency loans, medical expenses, weddings, etc.)

In addition, OneMain Financial also offers auto loans for purchases, refinances, as well as repairs.


In this OneMain Financial loans review, we are also going to share with you the different features that you will find in OneMain Financial personal loans.

Some of the features of OneMain Financial’s personal loans are very much appealing to borrowers. This includes:

  • A soft initial credit inquiry
  • Free VantageScore credit score
  • Joint applications
  • Rewards

Let’s take a look at each of these features —

Soft Initial Credit Inquiry

One of the features of OneMain Financial personal loans is that it conducts a soft initial credit inquiry. With OneMain, you can check to see if you are prequalified for a personal loan, and you can do this online.

Just so you know a soft credit inquiry means it will not affect your credit score negatively. However, if you decide to move forward, and formally apply for a loan, a full hard credit inquiry will be done. This process can impact your credit score.

Free VantageScore Credit Score

For primary borrowers, you can log in to your account and get a free copy of your VantageScore credit score every quarter.

Joint Applications

There are borrowers who prefer adding a cosigner. Unlike other lending companies, OneMain Financial allows joint personal loan applications.

By having a cosigner, a borrower may qualify for a larger amount of loan. This, however, requires that a cosigner must have a good or excellent credit history.

While having a cosigner may sound appealing to a lot of people, as a borrower, it is important to know and understand that having a cosigner can be risky. The cosigner is equally liable for the loan, which means if the primary borrower fails to pay his or her financial obligations on the loan, the cosigner will have to take over.

In addition, both the primary borrower and the cosigner’s credit score may be affected, which means it could affect future loan attempts.


OneMain Financial does have a rewards system. Borrowers could earn rewards in different ways like when you do the following:

  • Sign up for direct pay
  • Make on-time payments every month
  • Connect to Facebook
  • Choose paperless statements


Apart from what we have already discussed in this OneMain Financial loans review, there are a few more important details that you need to know before making a loan application. These are as follows:

  • Loan Amounts
  • Loan Terms
  • Annual Percentage Rate
  • Fees
  • Funding

Loan Amounts

As a borrower, it is important to know up to how much money a lender allows to borrow. This is one way to help you decide whether the company is the right one for you.

With OneMain Financial, the lending company offers personal loans amounting from $1,500 up to $20,000. The minimum or maximum loan amount varies depending on the state where you reside, which is why it is important to check the nearest OneMain Financial or call them.

Anyway, as per OneMain Financial, the company made it clear that not all borrowers qualify for big loan amounts.

In addition, OneMain Financial requires collateral for borrowers who will qualify for large loan amounts. The collateral comes in the form of a lien on a motor vehicle under your name. The vehicle must also be 10 years or newer, and that it must have valid insurance coverage.

Loan Terms

Just like most lending companies, OneMain Financial provides flexible repayment terms. They come in four options, which are as follows:

  • 24 months
  • 36 months
  • 48 months
  • 60 months

If you are looking for a lender that allows you to pay for the loan for a long period of time, then, OneMain Financial may just be it.

Annual Percentage Rate

Unlike other lending companies that offer both fixed-rate and variable-rate APR, OneMain Financial only offers one — that is fixed-rate loans.

At OneMain Financial, fixed-rate loans’ annual percentage rate (APR) range from 18% up to 35.99%.

Although the company does not offer a variable rate, it does offer both secured and unsecured loan options.

Similar to any other secured loan, if you borrow money without collateral, that automatically falls under an unsecured loan, which means, you are likely to pay a higher APR. Secured loans do always have lower APR compared to unsecured ones.


Probably one of the downfalls of OneMain Financial is the fact that the lending company charges high amounts compared to other lending companies.

Take note that as a borrower, you must also look into the fees a lender charges. You have to factor that in when making an informed decision.

At OneMain Financial, borrowers may expect the following potential costs:

  • Origination Fee – OneMain Financial charges origination that could go as low as 1% and as high as 10%. It could also be a flat fee that ranges between $25 and $400. Please note that the actual fee will be based on certain factors like your state of residence.
  • Late Payment Fee – OneMain Financial do offer a grace period but that depends on the state where you reside though. However, once payments are not done after the grace period, the company will automatically charge the borrower up to 15% of the delinquent balance or a flat fee between $5 and $30. Again, the actual fee varied on the borrower’s state of residence.
  • Government Fees – OneMain Financial may charge borrowers for placing a lien on their vehicle’s title. That is of course if the borrower opt for a secured loan, and that the state where the person resides allows it. Usually, the fees are charged by the state or country to the lender, and then the lender will pass the fee along to the borrower at cost.
  • Non-Sufficient Funds Fee – If in case of an insufficient fund in your account, certain states may charge a fee of $10 up to $50 when your payment is returned.

Meanwhile, on a lighter note, OneMain Financial does not charge prepayment penalties. Thus, if you wish to pay off the loan earlier than scheduled, you may do definitely do so without having to worry about getting charged.


In terms of funding, once your personal loan application is approved, you may be able to pick up your check as soon as the same day of your application.

Meanwhile, if you choose to receive the loan via Automated Clearing House (ACH), you may have to wait for one to two business days depending on the time of your loan closing.


Other important details to note are the qualification details set by OneMain Financial.

Fortunately, OneMain Financial is accessible to most people regardless of financial background. The company has not set any minimum or maximum credit score for example, which makes it a good choice for those with not-so-perfect credit history.

Similar to most lenders, however, the rule is, if you have a better credit score, the lower your interest rate will be. Otherwise, you have to face a high APR.

Moving on, OneMain Financial requirements are as basic as it can be. Of course, you will be required to provide personal information (such as your address, your Social Security number, etc.), as well as your employment information.

You must also be of legal age to be qualified for the loan, and a resident of the various states where OneMain Financial operates.


At this point in our OneMain Financial loans review, we are going to discuss the application process.

Once you have been approved online, you then have to visit an OneMain Financial branch near you for an in-person interview with a loan specialist. This process is done to help verify your identity, as well as your financial information before signing off on the loan is finalized.

Also, if you opt for a secured loan, you will have to present the documents of the collateral.

To make the application process at OneMain Financial smooth, all you have to do is follow the following steps:

STEP 1: Apply online. Go to OneMain Financial website and do an online application. You will be asked to provide basic personal information.

STEP 2: Indicate the desired loan amount, purpose, your net monthly income, as well as your employment information. You will also have to include information if you own a property or not and if you have an existing bank account.

STEP 3: Wait for a response. OneMain Financial provides an almost-instant response. It also sends an email that contains more detailed information regarding the loan application.

STEP 4: Schedule an in-person interview. An in-person interview with a loan specialist, as mentioned earlier, is required to verify both your personal and financial information, as well as in closing the loan.

STEP 5: During the interview, present all the necessary documents to the loan officer. These documents may include your proof of identity, income, and employment details, as well as documents of the collateral.

STEP 6: Expect for a hard credit check. Like most lenders, OneMain Financial will conduct a hard credit check, which could adversely affect your credit score.

STEP 7: Sign the loan agreement. Once you have reviewed the loan terms and conditions, and you agree with everything, all you need to do is sign the loan agreement to seal the deal.

Given the above-mentioned process, expect that it could take an average of two to three business days. Although it seems long, it is possible for OneMain to make your check available the same day you apply or the next business day after approval has been served.


Our OneMain Financial loans review will not be complete without listing down the pros and cons that we found.

Similar to all the other lending companies out there, OneMain Financial has its share of good and bad, and this includes the following:


  • It does not have a minimum credit requirement. OneMain Financial does not disclose the company’s minimum credit requirements. However, most reports indicate that the lending company is open to worth with borrowers who have challenging credit history.
  • It does have a number of branches across the country. As mentioned earlier, OneMain Financial does have over 1,500 physical branches across 44 states.
  • It provides a soft initial credit inquiry. By going through soft credit inquiries that do not affect your credit score, you get to find out if you prequalify for a personal loan or not. Also, by doing so, it’s easier to rate shop and compare deals among other lenders.
  • The company accepts joint applications. Unlike other lenders, OneMain Financial allows multiple borrowers on a loan.
  • The company offers rewards. As mentioned earlier, OneMain Financial does have a few perks that customers can eventually enjoy.


  • The loan amount is only limited for up to $20,000. If you are planning to borrow more than that, then you may have to look for another lender.
  • It has a high starting APR. Compared to other subprime lenders out there, OneMain does have a higher starting APR at 18%.
  • It does charge certain fees. Although it does not charge a prepayment fee, OneMain Financial does charge origination fees, late fees, and more. It is safe to say that if you are a responsible borrower, you can definitely get rid of certain fees.


As mentioned, OneMain Financial is a good option for people with challenging credit history. Although it comes with certain fees and charges, the company does not charge prepayment terms for those who would want to pay off their loans earlier than scheduled.

Just like most lenders, OneMain Financial has its share of limitations – including loan amounts and higher APR as compared to its competitors.

However, overall, based on the information we gathered for this OneMain Financial loans review, we got to say that this lender is definitely a promising one and that it is worth dealing with.

Investment Apps and Websites

What Are Collateral Loans And What Makes Them Ideal For You

There are two types of loans — one that requires collateral, and the other that does not require any “security”. Today, we are going to put some light on what collateral loans are. We will provide all the essential information to help you understand what this type of loan is all about, and why you should consider getting one.

What Are Collateral Loans

In an investigative paper entitled, “Secured Lending and Borrowers’ Riskiness” by Alberto Franco Pozzolo, it says that “a large number of bank loans are backed by real or personal guarantees.” Furthermore, it states that according to a report by Berger and Udell (1990), nearly 70 percent of all commercial and industrial loans in the United States are made on a secured basis.

Meanwhile, in a report published online by Statista, it says that from March 2014 to June 2020, the loans granted by various commercial banks in the United States amounted to an estimated 14.85 trillion U.S. dollars. Definitely high as compared to previous years. We thought the numbers might even spike in the coming months given the current situation in the country and all over the world.


Getting loans is inevitable especially during crucial times when our financial capabilities are testes – times such as now.

Now, if you are new to borrowing money from financial institutions or lending company, know that as mentioned, there are two types of loans – secured and unsecured loans.

Secured loans are collateral loans, which means, you can only apply for the loan if you have collateral that serves as the company’s “security” should you fail to meet your obligations. Meanwhile. Unsecured loans allow you to borrow money without the need for collateral.

It is important to understand both. However, today, we are going to focus on understanding what are collateral loans.

For your reference, here are the different points that we are going to tackle:

  • What is collateral?
  • How does collateral work?
  • What are the different types of collateral?
  • What is a collateral loan?
  • What are the different types of collateral loans?
  • How to apply for a collateral loan?
  • What are the pros and cons of collateral loans?


Before we even talk about what collateral loan is all about, let us first define what collateral is.

The term collateral, according to Investopedia, refers to an asset that a borrower provides, while the lender accepts to serve as “security” for a loan.

Collateral comes in different forms depending on the type of loan, and also, depending on what the lender requires. It could be in the form of a real estate, vehicle, or other kinds of assets based on the purpose of the loan.

The collateral serves as a form of protection for the lending company in case the borrower defaults on their loan payments. Should that happen, the lender can seize the collateral in lieu of the missed loan payments. The lender will then have to decide whether to sell the asset or keep it.


When borrowing through a secured loan, normally, the borrower will have to go through a certain process wherein the lender will check if you have the ability to repay the money you are loaning for. And one of the factors that they consider, rather, the most important factor that lenders will look into is if you have collateral that will serve as security for the loan.

Generally, collateral helps minimize the risk for lenders. It gives them a sense of assurance that no matter what happens — especially if the borrower defaults — the lender has a sort of “security blanket” in the form of the borrower’s asset.

As mentioned earlier, in case the borrower does default, the lender will automatically have the power over the collateral. The lender could sell it and apply the money it gets to the unpaid portion of the loan. If for instance, the collateral is not enough to cover the remaining balance, the lender has the option to pursue legal action.

Collaterals come in different forms — it could be in the form of real estate, a car, etc. Usually, it relates to the nature of the loan, which we are going to talk about in detail later on.

Generally, secured loans or collateral loans are available in lower interest rates as compared to unsecured loans.

In addition, just so you know, a lender’s claim to a borrower’s asset, which was made collateral is called a lien. It basically refers to the lender’s legal right or claims against an asset to help satisfy a debt, according to Investopedia.


Now, before we answer the question, “What are collateral loans?” Allow us to provide you first with the different types of collateral available and/or accepted by lenders when aiming to get a secured or collateral loan.

If you are a borrower, it is important that you know the different types of collateral so you get to determine if you can afford a secured loan or not.

As mentioned, any asset can serve as collateral — but that depends on the requirements of the lender. Thus, it is important that you ask your preferred lending company first what they do and do not accept as collateral before you apply for a secured loan.

Generally speaking though, lending companies or financial institutions prefer assets that are easy to value and turn into cash.

One perfect example is money in a savings account. It usually is great for collateral. Why? It is because lenders know how much their value is, and it’s very easy to collect.

Apart from that, here are some other forms of collateral:

  • Automobiles
  • Real estate (including equity of your home)
  • Investments
  • Insurance policies
  • Cash accounts (except retirement accounts – although there may be exemptions)
  • Machinery and equipment
  • Valuables and collectibles
  • Future payments from customers (receivables)

Please note that even if you are planning to get a business loan, personal assets may also be considered or part of a personal guarantee. Meanwhile, retirement accounts like IRAs are usually not allowed to serve as collateral.

In addition, we thought you might as well know that when it comes to valuing your assets, generally, lenders offer less than the value of the pledged asset. Some assets may even be heavily discounted. The purpose of doing this is that lenders will have more chances of getting all their money back just in case the investment loses value along the way.

As a borrower, it is important to keep in mind that in case your pledged assets lose value for whatever reason, there would be a greater chance that you might have to pledge additional assets to ensure a collateral loan in place.

Ideally, you must pay whatever you owe and keep your asset with you. That should always be the aim of any borrower of a secured loan. Otherwise, it’s much of a hassle really.


We always say this — loans are inevitable. All the more these days when times are really tough. Loans allow us to get through certain points in our lives — like emergency situations and money is scarce.

Good thing though lending companies and/or financial institutions do exist. While there is an easier way of getting a loan through unsecured loans, the downside is that it costs a lot.

But there is one more option available though that comes with better rates — secured loans or also known as collateral loans.

Based on the definition of what collateral is, a collateral loan refers to a type of loan wherein the lender requires an asset to serve as collateral. The collateral serves as the lender’s assurance that should the borrower do not meet his or her loan payment obligations, the lender can seize the collateral and sell it to recover some or all of its losses.

As compared to unsecured loans, secured loans or collateral loans do have lower interest rates. Needless to say, the requirements are less strict because collateral exists. Thus, this makes it ideal for people who have assets and are not afraid to lose their assets in case of default.

Before we move on, if you are seriously considering getting a collateral loan anytime soon, we suggest you check the video below by eHowFinance wherein they share about tips on collateral loans.


Now that you already know what a collateral loan is all about, this time, we are going to talk about what are collateral loans – its types and a definition of each, of course.

While there are different types of collateral loans, below are some of the most popular examples of collateral loans:

  • Personal Loans
  • Auto Loans
  • Mortgages
  • Small Business Loans
  • Margin Trading

Personal Loans

While most personal loans are unsecured loans, there are also a couple of secured ones.

Generally, consumers use personal loans to consolidate existing debt, build credit, or finance everyday expenses.

As mentioned, personal loans come in two different types — secured and unsecured.

Just like any secured loan, personal loans are backed by collateral. By having collateral, it helps reduce the lender’s exposure to the risk of default.

More so, with secured personal loans, lenders are able to charge a lower interest rate as compared to unsecured personal loans.

Apart from a physical property like houses or vehicles, lenders also accept monetary assets such as savings, future paychecks, or investments as collateral for personal loans.

Auto Loans

Auto loans are one of the most common types of secured loans used by a lot of consumers.

For this particular collateral loan type, the asset being purchased, or the car that is being purchased is used as collateral for the loan.

It is usual to a lot of lenders mandating that assets be appraised to know the proper value of the collateral. This process helps lenders determine whether it is worth the approval of the loan or not.


Just like auto loans, mortgages are also another very common collateral loan type. Similar car loans, it also uses the asset being purchased as collateral for the loan.

When it comes to appraisal, as compared to auto loans, lenders are more strict in mandating that the property be appraised to determine the current value of the collateral.

The appraisal process is particularly important for mortgage applicants because lenders only approve home loans if the appraised value matches or exceeds the sale price.

Small Business Loans

If you have a growing business, and you need funds to help finance its needs, one of the most popular ways business owners do is to apply for a small business loan. Small business loans can be used for different reasons like financing office space, hiring new people, as well as in purchasing new equipment.

Normally, acceptable collateral for this type of loan includes future payments by customers, inventory, as well as real estate. Personal assets of the business owner/s may also be used to secure approval for this type of loan.

In some cases, there are lenders that require a “personal guarantee” from small business owners. This refers to a written promise or assurance that the borrower’s personal assets can be seized if the company fails to meet its financial obligations to the lender.

Margin Trading

Although this one’s not as highly popular as the previous ones, collateralized loans are also considered a factor in margin trading.

What happens is that an investor would borrow funds from a broker to buy shares. The investor will then use the balance in his or her brokerage account as collateral to the loan.

The loan helps increase the number of shares the investor can buy, which multiplies the potential gains in case of an increase in value.

The downside of this type of loan though is that the risks are also multiplied. This means, should the shares decrease in value, it is likely that the broker will demand payment of whatever the difference is, which means the account serves as collateral if the borrower is unable to cover whatever is lost.


Now that you already know some of the primary details on collateral loans, this time, we are going to look into the application process.

Generally speaking, the application process for collateral loans vary depending on factors like the type of collateral used, as well as the amount of the loan. Of course, where you apply for a collateral loan will also be factored in as some lenders have a very extensive application process, while others are not.

Just like any other loan application though, borrowers must gather some important documents that lenders need to proceed with the application. This includes documentation such as Social Security number, proof of income, as well as driver’s license and state ID.

Since this is a collateral loan, obviously, borrowers must also be able to provide documentation on the collateral itself like the title or deed for an auto or home loan. If in case the loan is secured by other personal property like bank accounts, insurance policy, or valuables, lenders may require borrowers to provide registration paperwork, photos, or other proof of ownership.

Once all necessary documents are ready, the lender or the financing company will then prepare the loan paperwork. They will also gather signatures from the borrower, and will also do a verification process to ensure the borrower’s eligibility for the loan. The verification includes credit scores, income, identity, as well as the ownership of the collateral.

When all the documentation is already gathered, all paperwork will then be sent through underwriting. Underwriting refers to a process that financing companies use to check on the risk associated with the loan. After this, the lender will make a decision about whether the application gets approved or not. Depending on the company,

Depending on the company, the underwriting process can take either a few minutes or several weeks, especially for mortgage loan applications.

As soon as the loan is approved though, financing companies issue check for the loan amount to the borrower.


There’s no such thing as perfect, right? The same philosophy goes to collateral loans, while it does have benefits, it also has its share of downfalls.

Having said that, here are some of the pros and cons we found with collateral loans:


  • It offers lower interest rates as compared to unsecured loans. The existence of collateral makes it possible for lenders to provide lower interest rates to borrowers of the loan. Lending companies are assured that even if the borrower does default, they will recover if not all, at least a portion of the loan through the collateral.
  • It can help build a borrower’s credit. Lenders report the payments you make to major credit bureaus. Thus, by making payments on time, a collateral loan can definitely help you build your credit score.
  • It provides loan opportunities for people with imperfect credit history. Because of the collateral, lenders are more willing to take a risk on borrowers with imperfect credit history. They are assured that no matter what happens, there’s collateral that will serve as the lender’s fallback.
  • It provides increased loan amounts. If a borrower does have extensive savings or a certificate of deposit, it would be easier for him or her to borrow larger amounts if need be.


  • The application process may take a while. Unlike unsecured loans, collateral loans require a lot of documentation. Needless to say, there’s a verification process as well. Thus, the whole application process may take a while.
  • Collateral can be repossessed by the lender due to default. Failure to pay the loan means the borrower will lose the asset, which was made as collateral to the loan. Once it is repossessed by the lender, the borrower automatically loses his or her ownership of the collateral.


To sum it all up, collateral loans are ideal for people who own assets that could serve as collateral to the loan. While it does have its risks, the fact that the interest is lower as compared to unsecured loans should make it a valuable choice among borrowers.

Have you thought of getting a collateral loan anytime soon? How do you find it so far?

We hope that through this, we were able to provide you essential information/answers to the question, “What are collateral loans?”

Investment Apps and Websites

What Is The Financial Definition Of Loan Commitment And How To Avail It

Understanding the financial definition of loan commitment is important to avoid confusion from the borrower’s end. At the same time, it is vital to ensure that as a borrower, you know your rights and the limitations of a loan commitment and that you fully recognize the responsibilities and obligations of both parties regarding the said agreement.

financial definition of commitment letter

In one way or another, you will need to get a loan one day.

You would probably get a loan to be able to buy yourself a new car, a house, or any major purchase you have been eyeing for, for the longest time.

But where do you get a loan?


Well, there are a number of places where you can get a loan from. Financial institutions like banks, credit unions, as well as the growing number of online lenders, are everywhere. Once you have decided to borrow money, all you got to do is just decide where exactly to borrow money from.

Now, but before anything else. As a responsible and knowledgeable borrower you got to scout for the best loan options. You have to look for the best deal before you even seal it.

Once you have decided where to get a loan from, what normally happens is, a financial institution would give you a loan commitment, which basically states that the bank or the credit union or the lender is providing you with the amount you need and that the money is available anytime you need it.

Okay, we understand that the term “loan commitment” is kind of vague for some. As we kept saying, as a borrower, it is important to fully understand the whole concept.

So, having said that, we are going to share with you some of the most important details that every borrower should know about loan commitments – particularly the financial definition of loan commitment.

In particular, we are going to discuss the following items:

  • What is the financial definition of loan commitment?
  • What are the pros and cons of loan commitments?
  • What is the difference between a loan commitment letter and a pre-qualification letter?
  • What is the difference between secured and unsecured loan commitments?
  • How does revolving differ from non-revolving loan commitments?
  • What are the different examples of loan commitments?
  • How to get a loan commitment?


As a borrower, it is vital that you understand where you are putting yourself into especially when it comes to financial matters.

In this case, you have to fully understand the definition of loan commitment in order to ensure that you know how it exactly works (especially if it’s your first time).

According to Investopedia, a loan commitment, also known as a commitment letter, is defined as “an agreement by a commercial bank or other financial institution to lend a business or individual a specified sum of money.

The money borrowed can “take the form of a single lump sum or—in the case of an open-end loan commitment—a line of credit that the borrower can draw upon as needed, up to a predetermined limit.”

The document basically contains the lender’s promise to offer a loan or credit depending on the agreed amount to a borrower. The commitment comes with all the terms and conditions of the loan.

Generally, financial institutions base their loan commitments on the borrower’s creditworthiness (which is why when borrowing money, it is important that you have good credit to make approvals easier). In the case of a secured commitment though, financial institutions would look into the value of the collateral (which could be in the form of a car or a house for individual consumers).

Once a borrower has been handed a loan commitment, the borrower can then use the funds up to the agreed-upon limit to the purpose of securing the loan.

Meanwhile, in the case of an open-ended loan commitment, this basically works like a revolving line of credit wherein when a borrower pays back a part of the loan’s principal amount, the lender adds that amount back to the available loan limit, which the borrower can use up again (basically like a credit card in the form of a loan).

It is important to take note, however, that if you are given an open-ended loan commitment, it means you have met the lender’s qualifications, at the same time, you hit the required credit score.

Now, is a loan commitment legal and binding?

According to the American Bar Association, “a loan agreement is like any other contract: a binding agreement enforceable in accordance with its terms.”

This means that once a lender (whether it be a bank, or a credit union, or an online lender) has provided you with a loan commitment, it basically means they are already committed to giving you that money specified in the document.

But, wait! Can a borrower negotiate loan provisions before signing the commitment?

Sure, you can! That is precisely why we always encourage borrowers to scout and look around before sealing a loan deal — to ensure that both parties (lender and borrower) agree to all provisions, and not just one-sided.

Just keep in mind that once you got a loan commitment, you always have the last say. Meaning, it’s up to you if you will use that commitment or you will look for another. But, to save time and effort, and not mess up with a lender, it’s best to ask for quotations first and look around for reviews. That way, you do not waste each other’s time and effort, right?

If you want to know more about what a loan commitment is, check out below informative video by

Real Estate Made Crystal Clear:


Now that you already know the financial definition of loan commitment, and what the whole idea is all about, this time, we are going to share with you the some of the benefits and downsides of loan commitments.


  • Loan commitments are useful to consumers who are planning to buy a car or a home, or any major purchases.
  • Open-ended loan commitments are flexible and can be used for paying unexpected short-term debt obligations, or in some cases, to cover financial emergencies.
  • Some loan commitments such as a home equity line of credit (HELOC) have low-interest rates.
  • Secured credit cards can help borrowers establish or rebuild good credit.


  • For secured loan commitments, in case the borrower fails to pay off the loan, they may lose their collateral.
  • Unsecured loan commitments tens to have a higher interest rate.


Perhaps you have already heard of the term “pre-qualification” letter in the past especially if you have a check on loan options before.

A lot of people often confuse pre-qualification letter with a loan commitment letter and vice versa. But the thing is, these two are totally different from one another.

A loan commitment letter or also known as loan pre-approval basically contains the lender’s promise or commitment that the loan will be granted to you. It states that the lender is satisfied with the borrower’s loan application, they have conducted a credit history, and that the borrower’s credit score meets the requirements set by the lender. Furthermore, the letter says that the borrower has already gone through the necessary underwriting procedure, and they are ready to give the loan.

Meanwhile, a pre-qualification letter or also known as fliers that people usually receive in the mail from lenders seem to offer you financial products like loans or credit cards. The offer was made by doing a preliminary look at your finances, which may include your income, debt, as well as your assets. The letter is not tantamount to offering you a loan, rather, it basically is offering you the possibility of getting a loan, as well as the opportunity to borrow money from that financial institution.

Now, when you get a prequalification letter, do not easily get excited, and call the bank. Only make a call when necessary as these calls will show up on your credit report. Just so you know, having too many inquiries on your credit report is not good as it may appear as you are trying to get a lot of credit — even if in reality, you’re really not.

So, to be sure, just make a call when you badly need to make it. Right?


Apart from understanding the financial definition of the loan commitment, it is also important to know that loan commitments have two types. These are secured and unsecured loan commitments.

Now, find out how the two differs below:

Secured Loan Commitments

A secured loan commitment is normally based on your creditworthiness as well as the presence of some form of collateral (could your house, car, or any asset you have) that will be backing up the loan. 

In the case of a home equity line of credit (HELOC) or a secured credit card, these two are referred to as open-ended secured loan commitments. This is because the credit limit is usually based on the value of the secured asset.

Now, since the credit limit on secured loan commitments is based on the value of the secured asset, borrowers would normally get to enjoy a higher limit, lower loan interest rate, and the payback time is longer.

The downside of unsecured loans though is that the approval process normally requires a lot of paperwork as compared to unsecured ones.

For secured loans, the lenders hold the collateral’s deed or title, or they place a lien on the asset until the loan has been paid off. But, in case the borrower defaults, it may cause the lender assuming ownership or selling the secured asset to cover the loan.

Unsecured Loan Commitments

Unlike secured loans, unsecured does not require any collateral to borrow money. Instead, it is primarily based on the borrower’s creditworthiness alone.

Normally, the rule of unsecured loans is that the higher the borrower’s credit score is, the higher the credit limit he or she gets.

However, since this is not backed by collateral, rates are usually higher as compared to secured loans. Also, they usually have a fixed minimum payment schedule as well as the interest rate.

Unsecured loans are ideal for those who want less paperwork and shorter approval time.


When planning to get a loan, it is very important to be familiar with the terminologies. It’s very important to avoid confusion in the future.

This time around, we are going to share with you the difference between a revolving loan commitment versus a non-revolving loan commitment.

Revolving Loan Commitment

Also called an open-ended loan commitment, a revolving commitment refers to a loan assurance given by a lender that guarantees the borrower the ability to use the funds from the loan not just once, but as long as payments are made on time.

Once the principal of the loan is paid off, the borrower can use the money again. The best example of this is credit cards.

Non-Revolving Loan Commitment

Meanwhile, a non-revolving credit or non-revolving loan commitment refers to a closed-end credit agreement, which means, you are only allowed to use the money once.

Once you have paid off the loan, the account is automatically closed. If you need funds, you will have to apply for a new loan.

Some common non-revolving loans include student loans, mortgage loans, and car loans.


It is also important to know that loan commitments come in different types and vary a little per type of loan.

To give you an idea, see below examples of loan commitments:

  • Revolving Secured Loan – The best example for this one is a HELOC. You get approved of a certain amount, and for as long as you are paying off the principal amount, you can use the funds over and over. Just make sure though that you only use enough that you can pay off as secured loans mean your asset like your home becomes the collateral. Failure to pay off means losing your asset.
  • Revolving Unsecured Loan – The best example for this is a credit card loan. You are given a credit limit, which you can re-use sans the collateral. It’s not ideal for major purchases though, and usually, the interest rate is higher.
  • Non-Revolving Secured Loan – A home mortgage is the best example of this type of loan. It basically is secured by the property itself. Once the loan is paid off, the account is closed. Another example if auto loan — for the same reason and purpose.
  • Non-Revolving Unsecured Loan – Personal loan is the one that best fits this type of loan. You borrow money (which you can use for anything) from a financial institution without any collateral.


Now, you already know the financial definition of loan commitment plus all the other equally important information that go with, what’s next then?

Well, it’s time to familiarize yourself with the process of getting a loan commitment.

Having said that, below is a step-by-step guide on how you can get a loan commitment:

STEP 1: Review your credit history.

In order to get a loan commitment letter, you got to make sure that your credit history is free from errors. If there’s any, make sure to fix them first before you even apply for a loan.

You can get a copy of your credit history from three major credit bureaus, which are Equifax, Experian, and TransUnion. Review each to ensure that your credit history is error-free.

Take note that your credit history, as well as a high credit score, is key in order to get a loan commitment letter.

STEP 2: Fill out a loan application.

Depending on where you are applying for a loan, you could either fill out a loan application online or on-site.

As part of the application process, you will be asked to provide your personal information including your social security number, address, and birthdate.

Lenders may also require you to disclose the amount of your current income, debts, and assets (if applying for a secured loan).

STEP 3: Allow the lender to pull your credit report.

To be able to determine your risk level, lenders would use your credit score as well as your payment history, thus, the need for your permission.

By the way, before you fill out an application for the loan, make sure to compare loans from at least three different lending institutions. This will allow you to sign to the best possible rate and terms of the loan.

STEP 4: Provide your financial documents to the lender.

The requirements may differ from one financial institution to another, but, normally, they will ask you to provide them with your financial documents, which include payslips, W-2a or tax returns, as well as asset statements.

STEP 5: Receive a loan commitment letter.

Once you have done the steps prior to this, and your financial records are all good, then, you do not have to worry anything, because for sure, the bank or any financial institution for that matter will surely hand you a loan commitment letter.


A loan is a loan. It’s borrowed money.

While there are a lot of financial institutions out there that are willing to lend funds to those who need them, getting a loan is not an easy-breezy kind of thing. Meaning, there is a process.

Like when giving out a loan commitment, banks and other financial institutions make sure they only provide such to those who qualify based on their respective set of requirements.

A loan commitment, which basically refers to the lender’s commitment to providing the funds to the borrower serves as the borrower’s assurance. Once the borrower has it, it means, he or she can proceed to buy whatever the money is intended for.

So, having all this information, do you think you’ll pass getting a loan commitment yet?

Keep in mind the financial definition of loan commitment and the process of getting and you will surely have a breeze receiving one.

Investment Apps and Websites

What Is A Personal Loan: Everything That You Need To Know

Understanding what is a personal loan will enable us to maximize the product to its full potential. As you know, a personal loan is one of the commonly used, needless to say, the most accessible form of loan for everyone.

what is a personal loan a comprehensive guide

Based on a report published by CNBC, the unsecured personal loan market in the United States hit an all-time high in 2019. It surged to “17 percent year over year to $138 billion, according to data from TransUnion“. In the same report, it stated that the digital-first financial technology or fintech companies are the primary drivers for the said increase, making personal loans available for everyone. Needless to say, making it easily accessible with just a click on their smartphones.

Furthermore, in data from the Chamber of Commerce, it says that the current total personal loan debt in the country has amounted to $143 billion, and just the same, fintech companies are to blame for the increased number. In fact, by Q4 2018, “fintech loans accounted for 38% of outstanding loan balances, compared to a mere 5% five years prior.


But apart from the existence of fintech companies, which, according to Investopedia, refers to “the integration of technology into offerings by financial services companies in order to improve their use and delivery to consumers,” another major reason for the increase of personal loans in the country is the fact that personal loans can be used for almost anything.

You can use it for both necessity and leisure, for emergency purposes, or for something that you have been planning to purchase for a while now.

But what is a personal loan really?

While some of us may be knowledgeable about this very popular form of a loan, others have very little knowledge about, and that is precisely why we are going to share with you everything that you need to know about – personal loans.

To be specific, we are going to tackle the following essential information about personal loans:

  • What is a personal loan?
  • How does a personal loan work?
  • What are the different types of personal loans?
  • Who is eligible to apply for a personal loan?
  • How to get approved for personal loans?
  • What can a personal loan be used for?
  • Where to apply for a personal loan from?


If you will search over the internet what is a personal loan over, you will find hundreds if not thousands of (mostly finance-related) sites with their own version of definition about the term. But, if you will examine each definition, they all basically mean one thing — it refers to the money borrowed from a lender, which could be a bank, a credit union, or an online lender.

The amount of money borrowed will be repaid with a corresponding interest, which could either be fixed-rate or variable-rate (we will discuss these terms further later on).

Generally, the interest rates on personal loans depend from one borrower to another, taking a lot into consideration the borrower’s credit.

Personal loans are installment loans, which means, you can pay it for a specific period of time depending on what you have agreed upon. It could be within x number of months or in some cases (especially when the loaned money is big), lenders allow x number of years to have it repaid. To put it simply, the money is issued right there and then, and the borrower has to repay the loan with a fixed payment over a predetermined loan period.

One more personal loan feature that makes it stand out from other forms of loans is that most personal loans are unsecured loans. This means that you do not need to provide any collateral to the lender.

However, unlike secured loans, the average interest rates on personal loans tend to be higher, but still lower as compared to credit card interest rates.

Before moving on, here’s a quick video by Keder Cormier wherein he discusses what personal loan is all about. It’s very informative, you should check it out by clicking the play button below:


Now that you already know what is a personal loan, this time we will discuss how exactly does it work.

We find it necessary that before you even get yourself into borrowing money through personal loans, you should make time to fully understand how it actually works. This will help spare yourself from confusion and making wrong moves or decisions with regards to personal loans.

So, as mentioned earlier, a personal loan is a type of installment loans like mortgage and auto loans. That means you borrow a certain amount of money, and then, you pay it back with an interest in monthly installments over a specific period, which usually ranges from 12 to 84 months.

Once you are done paying off the loan, your account will be automatically closed. Should you need more money, all you have to do is apply for a new loan. That’s basically how a personal loan cycle goes.

However, it is important to take note that the details vary from one lender to another, which is why it is important that you do your research first before you jump into sending a personal loan application to a financial institution.

There are three major details that you need to look into. These are:

  • Interest Rates
  • Repayment Period
  • Origination Fees

So, what are these all about? Read on.

Interest Rates

Earlier, we mentioned about fixed rates and variable rates. It’s time for you to fully understand what these terms are all about.

But first, know that interest rates vary from one borrower to another depending on the person’s credit. The better your credit is, the lower your interest will be. Otherwise, if you have thin or bad credit, expect to get a higher interest rate. Some of which may be as high as credit card rates, and in some cases, lenders may require you to have a co-signer for the loan.

Now, what is a fixed-rate, and what is a variable rate?

  • Fixed-rate is the most common type of interest rate among lenders. This basically means the interest rate does not fluctuate during the entire period of the loans. You basically make the same amount of monthly payment from day one of the loan periods. This allows borrowers to accurately predict their monthly payments.
  • Variable-rate, meanwhile, is not that popular, but it’s there. Basically, the interest rate charged on the outstanding balance depends on the market interest rates change. Thus, as a result, you may end up paying more or less.

So, as you can see, between the two, fixed-rate interest is the most ideal. No wonder why it is widely used by lenders as compared to variable-rate interest.

Repayment Period

Apart from the interest rate, another important thing that you need to look into is a personal loan’s repayment period or repayment time.

All lenders have their respective repayment periods depending on the amount of money borrowed or in other cases, on the borrower’s ability to pay off the debt.

Repayments vary — normally, 12, 24, 36, 48, or even as long as 84 months. While longer payment periods seem to be more convenient because it means lower monthly payments, this, however, also means you are going to pay more in interest.

Meanwhile, a shorter payment period, while it means higher monthly payments, results in lower interest rates.

It is also important to note that having an open loan or existing loan can affect your ability to get approved for other loans, or even for availing credit cards. This means, if you pay for a loan longer, you have to be open to face the consequences, which limits your ability in obtaining new credit.

Also, a lot of personal loans come with penalties for paying off the debt early, which is why between long-term and short-term loan periods, it’s best to take the shortest repayment period that you can afford.

Origination Fees

Origination fee refers to a fee a borrower needs to pay to his or her lender upon receipt of funds. Basically, the fee compensates the lender for expenses such as processing your application, as well as marketing.

Normally, the origination fee ranges from 1% up to 8% of the total amount borrowed. Although in some cases, there are lenders that charge a flat origination fee, while others do not charge anything at all. Again, it varies from lender to lender, which is why comparing lenders before you seal a deal is ideal.

The origination fee is only charged if the loan is approved and funded. So, if your personal loan application is denied, you should not be paying any origination fee.

Generally, lenders deduct the origination fee from the total approved loan amount. So, for instance, your personal loan amounts to $8,000. The lender charges a 2% origination fee, which in this case amounts to $160. Thus, instead of receiving the full $8,000 loaned amount, the borrower will receive $7,840 (origination fee is already deducted).

To be specific, the origination fee is charged to cover upfront costs such as the following:

  • Income verification with national databases
  • Credit checking with credit bureaus or other alternative sources
  • Reviewing your application

To put it simply, the origination fee may be determined based on the loan amount, the repayment period, the borrower’s credit history, as well as whether or not there’s a co-signer required, and the reason for the personal loan.


Part of understanding what is a personal loan is knowing and understanding also the different types of personal loans.

There are two types of personal loans. These are secured loans and unsecured loans.

What are these and what sets each other apart from one another?

Here’s a quick definition of the two:

Secured Loans

This refers to the type of personal loan that is backed by collateral like a certificate of deposit or a savings account. Basically, if the borrower is not able to make payments for the loaned amount, the lender has the right to claim the borrower’s asset as payment for the loan instead. Since the collateral reduces the lender’s risk, it’s normally easier to qualify for this type of loan. More so, lenders offer more favorable terms.

Unsecured Loans

Unsecured loans, meanwhile, refers to a type of personal loan that is not backed by collateral. Generally, lenders that provide or offer unsecured personal loans base whether the borrower qualifies or not for a loan on his or her financial history. However, the downside of unsecured loans is that they tend to have higher interest rates as compared to secured loans.

To be honest, it’s hard to say that secured loans are better than unsecured loans, or vice versa, because obviously, it depends on a number of reasons like if the borrower wants lower interest rate or if the borrower does have an asset that he or she can pledge as collateral.

It’s safe to say that determining which is better between the two will depend on the borrower. So, yeah, it all depends on you.


By this time, you already know what is a personal loan, how it works, and the two types of personal loans. Now, it’s about knowing who is eligible to apply for a personal loan.

Generally speaking, a borrower’s eligibility for a personal loan depends from one lender to another. Each lender has their own set of requirements specified for personal loan applicants. Some of the common requirements include:

  • Must be a U.S. citizen or U.S. resident cardholder
  • Must be 18 years old and above
  • Must have a valid U.S. bank account
  • Employment details
  • Your monthly/annual income
  • Proof of identification

Furthermore, a borrower’s eligibility, as well as the interest rate he or she is quoted, will be based on two major factors, which are your credit score, as well as your debt-to-income ratio. We’ll discuss this further because these two are very important. These are the make it or break it factors of your personal loan application.

Credit Score

Every personal loan lender has the freedom to their own credit score requirements.

However, according to Fair Isaac Corporation (FICO), which is a company that offers a credit-risk model with a score, and over 670 credit score is considered as “Good,” while more than 740 credit score is “Very Good,” and 800 and more is considered as “Excellent”.

Unfortunately, while those borrowers with 670 and below credit score or no credit score may still qualify for a personal loan, they may either find it hard to get approval or get one but with a higher interest rate.

In some cases, though, creditors or lenders allow borrowers with low credit scores provided they have a credit-worthy co-signer, or they have an asset that they can use as collateral to their loan (this one will fall under secured loans though).

Just to give you an idea, personal loan borrowers with great credit scores may qualify for an interest rate under 5%, while those who are less-qualified or with low credit scores may get approval with an APR of over 30%.

You see, the difference is quite huge.

Debt-to-Income Ratio

Borrowers’ will find your debt-to-income or DTI ratio by simply dividing their total monthly debt payments by their monthly income.

For instance, if you spend $500 to debt repayment monthly, and you have an income of $2,500 a month, your DTI is 20%.

According to one of the major banks in the country, Wells Fargo, you are “looking good” if you have a DTI that is below 35% a month. Meanwhile, borrowers with a DTI of 36% up to 39% are put under the “Opportunity to Improve” category. Those who have over 50% DTI need to “Take Action” because they are likely to have very limited options.


In relation to the qualifications we mentioned earlier, we are going to share with you some secrets, rather essentials, to ensure your personal loan application’s approval.

As we mentioned earlier, the approval of personal loans varies from one lender to another. More so, the requirements also vary. However, the process is quite the same.

Lenders evaluate personal loan applications according to the person’s creditworthiness. Typically, this means lenders review the borrower’s borrowing history, as well as his or her income.

There are three major aspects that you need to work on if you want to get your personal loan application approved. These are:

  • Credit Score
  • Income
  • Collateral

Of course, we are going to discuss further each item for you to fully understand their importance.

Credit Score

It’s probably safe to say that checking the borrower’s credit score is mandatory among lenders. Lenders obtain a credit score to see whether or not you have already borrowed in the past.

Basically, a borrower’s credit report contains details about past loans, as well as late payments, and other public records that lenders might want to know.

In other cases though, lenders use “alternative” credit scoring tools like taking your history on-time rent as well as utility payments. These serve as their predictor of how you are going to repay a loan.


Yes, how much you earn matters as well when applying for personal loans. By knowing the borrower’s income, lenders get to determine whether or not the borrower does have the capacity to pay off the loan.

Lenders may ask details about your income, as well as your employment.

Furthermore, knowing your income will help lenders calculate your debt-to-income ratio to ensure that the loan payment will not consume too much of the borrower’s monthly income.


Just to reiterate, collateral is only necessary if you are applying for a secured loan. Unsecured loans do not require such.

The term collateral refers to any asset (a property, a savings account, etc.) that a lender accepts to secure a loan. If the borrower is unable to make payments for the loan, the lender may take the collateral to serve as a payment for the loan instead.


By now, you have probably understood so much about what is a personal loan. But apart from what we have already discussed, it is also important that you know in what particular circumstance you can use a personal loan.

Generally speaking, you can use a personal loan for almost anything and everything under the sun. Unlike other types of loans, a personal loan covers almost any probable reason that you will need extra money.

But to be more specific, here are some of the common reasons where personal loans are used for:

Debt Consolidation

Some of us tend to have overflowing debts, and sometimes it gets to a point when it’s already too much to handle. And before you even think about just running away, one thing you can do to get away with so many debts is to consolidate them — especially if your current creditors are charging you a higher interest rate.

You can use a personal loan to consolidate old debts in just one lower rate. This will definitely work to your advantage. More so if the lender does not charge an origination fee.

Here’s the thing, once you have decided to consolidate your loans, make sure to pay off the current personal loan first. Consolidating loans can be quite tempting, but with determination and discipline, you will surely avoid getting into the same situation over again.

Student Debt

Some people use a personal loan to pay off existing student debt, although, to be honest, sometimes it’s not really a wise idea. It’s because the student loan interest rate is typically lower as compared to other types of loans — including a personal loan.

However, when you are left with no other choice, you can always opt to apply for a personal loan. Just make sure though that you are dealing with a lender that provides the lowest possible interest rate.

Medical Bills

Emergency happens, and oftentimes, it happens when we least expect it, and worse, when we are not financially ready for it. Good thing is, personal loans can help you when medical bills are beyond what you can afford.

However, before anything else, make sure to negotiate the bills first. Some healthcare providers may be able to give you a discount, which will surely help lessen the financial requirement. Another thing is to ask the healthcare provider if you can pay off the medical bills in installment. But as they say, when all else fails, a personal loan may be what you really need to pay off the bills.

Small Home Improvements

You know, sometimes we tend to find ourselves wanting some change in our homes, but we cannot pursue it because of the lack of budget. But guess what? Personal loans can also be used for home improvement purposes!

While it is more popular to use home equity loans for home improvement projects, some people would prefer using a personal loan instead especially if you do not really need a significant amount of money.

A personal loan intended for home improvements could actually be less expensive. Needless to say, it’s easier to apply for.

Expensive Purchases

There are times when we want to buy something but couldn’t because we are financially incapable or simply because we do not have cash. The thing is, a personal loan actually lets you use the money for whatever purchases especially expensive ones of course. Don’t worry you won’t be judged.

But of course, it is always best to make sure that you are only spending money rather than borrowing money for worthy purchases. Worthy meaning something that you genuinely need, and not just because you want that item for yourself.

Travel or Vacation

Dreaming for a fabulous vacation? You surely can do that! And yes, you can apply for a personal loan for that purpose.

Ideally, you should save up for your dream travel or vacation. However, there are instances when you need to go to a place, and saving up would cause a delay. Thus, a personal loan might just be a great idea for you.

Car Financing

Some people prefer personal loans over car loans because car loans are secured loans, which means the car you bought automatically becomes collateral. So, in case of failed payments, your dream car will be repossessed by the lender.

More so, personal loans do not require a downpayment, while auto loans usually do. So, unless you score a low-rate auto loan, a personal loan would be more ideal to buy yourself a new car.

Small Business

Technically, a personal loan is not designed for business purposes. However, there are entrepreneurs especially small ones who prefer using a personal loan in funding their business’s launching or operating costs. Also, some online entrepreneurs who need small capital would rather use a personal loan over a more appropriate loan product.

Wedding Cost

Ideally, when getting married, you use your savings to fund this life-changing event. However, in some couples, this is not the case. Thus, the option to apply for a personal loan to help get through their desired or dream wedding.

Let’s face it, even the simplest wedding possible still need a penny to push through. So, when you really have to, when you have already pulled out all your resources but still not enough, a personal loan may be ideal for you. Just make sure though you only borrow what you need and not too much. After all, you do not want to spend the first few years of your married life paying off debts, right?

The list is actually long. There are just too many possible reasons to get a personal loan. As we have said earlier, unlike other types of loans out there, a personal loan can be used for almost if not everything. So, yeah, it’s safe to say that a personal loan is handy. You can borrow or apply for it anytime you badly need cash.


So, you know now what is a personal loan. You also know already about the different types of personal loans, as well as who’s eligible, and for what purpose can you apply for such loan type. This time around, we are going to share with you where exactly to apply for a personal loan.

There are actually three different entities where you can apply for a personal loan. These are through:

  • Banks
  • Credit Unions
  • Online Lenders or Creditors

Let’s discuss each further –


Banks are very accessible. In almost every corner especially if you are living in the downtown area, you will see a bank. Some of these have been around for decades, while others are relatively new in the banking industry.

Nevertheless, they all have one thing in common. They do offer personal loans to their customers.

The thing about traditional banks is that loaning or borrowing money requires the borrower to show up at the branch of the bank. He or she needs to apply for a personal loan in person.

As compared to credit unions and online lenders, banks are stricter when it comes to requirements. They do not easily approve a loan application — unless you qualify.

One major draw of banks, as we have mentioned earlier is the fact that they are all over the place. You can choose from a wide selection of banks in your area.

More so, applying in person allows borrowers to take advantage of benefits like asking help from a credit specialist to recommend the best possible loan offer. At the same time, borrowers may also request to have them go through the whole process.

In addition to that, the delivery process tends to be quicker as well especially if the borrower does have existing savings or checking accounts with the bank already.

Meanwhile, although traditional banking service is the key to applying for a personal loan in banks, with the technological advancement around, most banks have already jumped into offering online loan application as well. Definitely, this makes the process easier and more convenient.

  • Requirements:

Requirements vary from one bank to another. However, most major banking institutions require a fairly minimum credit score of 660 to get approved for a personal loan application. With that said, banks are not ideal for those who have low credit scores.

  • Interest Rate:

Interest rates also vary from bank to bank. Usually, though, banks charge at least 6%, and at most 25%.

Some of the best banks that offer personal loans are:

  • American Express
  • Citibank
  • KeyBank
  • Wells Fargo
  • U.S. Bank
  • Discover Bank
  • TD Bank
  • PNC
  • Fifth Third Bank

Credit Unions

Between the three options on where to get a personal loan from, credit unions are probably the best choice.

First off, a credit union is a not-for-profit organization. It is a member-owned financial cooperative. To be able to get a personal loan, you have to be a member first, and because you are a member of the organization, that means you are part-owner of it.

The thing we like about credit unions is that it provides its members with a variety of financial services, which include credit with competitive rates.

Unlike banks, credit unions are not that popular. They are not as many as banks. That is why when you are opting to loan from a credit union, it is best to check first if you have one in your area.

Just like banks, though, you have to apply for a personal loan in person. Digital application is not a popular practice among credit unions, but who knows, maybe one of these days, they eventually offer it as well.

  • Requirements:

Requirements for a personal loan application vary depending on the credit union. However, one thing is for sure, you have to be a member. Otherwise, you won’t be qualified at all.

With regards to credit score requirements, since credit unions are more community-oriented, they are more likely to approve loans even with people who do not have good credit.

  • Interest Rate:

One of the best things about credit unions is that they offer lower interest rates compared to banks. This becomes possible because of the fact that federal credit unions have an interest rate cap set by a national board. Meanwhile, state credit unions have a cap set by the state government. At most, credit unions charge up to 18% interest rate only.

Some of the best credit unions that offer personal loans are:

  • Affinity Federal Credit Union
  • Aspire Federal Credit Union
  • Georgia’s Own Credit Union
  • Pentagon Federal Credit Union
  • NASA Federal Credit Union

Online Lenders or Creditors

Obviously, online lenders refer to creditors who operate entirely online. This industry has grown over the years perhaps because of convenience, and the fact that online lenders offer competitive rates as well.

One of the major draws of online lenders is that you do not have to wait long for approval. In just a few minutes after an online loan application, a decision is given. Also, funds are provided as soon as approved.

Online lenders are ideal for people who are always on-the-go or those who badly need funds as soon as possible.

  • Requirements:

Online lenders do have their respective sets of requirements. Unlike banks and credit unions though, online creditors lend to people with bad or have no credit at all.

  • Interest Rate:

Compared to banks and credit unions, online lenders tend to have a higher interest rate (depends on your credit). In fact, some online lenders may charge as high as 36%, while some, as low as 6% interest rate.

Some of the best online lenders that offer personal loans are:

  • FreedomPlus
  • Marcus by Goldman Sachs
  • SoFi
  • LendingClub
  • LendingPoint


Perhaps by this time you have fully understood what a personal loan is all about. As you can see, there are so many things that you need to know before jumping into a decision of getting a personal loan on a financial institution.

As borrowers, we thought it is our responsibility to be fully informed to avoid making uninformed decisions or committing mistakes especially when it comes to money. After all, nobody wants to waste money, right? All the more if it is hard-earned.

So, do you see yourself applying for a personal loan anytime soon?

Just keep in mind all the information we shared about a personal loan. Not just about what is a personal loan, but all the other equally important information that comes with it.