Smart Ways to Use Personal Loans in 2025
What Are Personal Loans?
Personal loans are sums of money borrowed from a bank or online lender, typically repaid over 1 to 5 years. Each month, you pay back a portion of the original amount plus interest.
Early Repayment Benefits
Many personal loans allow early repayment, which can save you money on interest. However, some lenders charge early repayment fees, so always check the terms before borrowing.
Secured vs. Unsecured Loans
Most personal loans are unsecured, meaning they don't require collateral like your car or house. Because of this, lenders usually require good credit for approval and better rates.
Uses for Personal Loans
You can use a personal loan for almost anything legal:
- Home repairs (e.g., fixing a leaky roof)
- Debt consolidation (e.g., paying off high-interest credit cards)
- Home improvements (e.g., a kitchen makeover)
Note: Lenders typically won't allow you to use a personal loan for a house down payment.
Interest Rates and APR
As of December 2025, some lenders offer rates as low as 6.24%. A single-digit rate is considered good and indicates strong credit. However, APR includes both the interest rate and any additional fees.
Origination Fees
Some lenders charge origination fees (up to 10% of the loan amount). Many lenders do not, so it's wise to shop around for the best deal.
Credit Score Requirements
If your credit score is 670 or higher, you have a better chance of getting approved and securing a lower rate. If your credit isn't great, obtaining a personal loan can be challenging.
