Should you get a personal loan? Here are the pros and cons

Core Insights - Personal loans are generally more affordable than credit cards, with average rates of 12.21% for personal loans compared to 19.72% for credit cards as of December 2025, making them a viable option for borrowers with good credit [2][5] - The predictability of fixed monthly payments associated with personal loans can aid in budget management, providing stability compared to variable credit card payments [3][33] - Personal loans can be beneficial for debt consolidation and covering necessary expenses, but they are not suitable for everyone and require careful consideration of individual financial situations [4][32] Interest Rates and Terms - Personal loans typically offer lower interest rates than credit cards, with borrowers with excellent credit potentially qualifying for rates under 10% [2] - Loan terms can extend up to seven years, allowing for manageable monthly payments [2][6] - Lenders may charge origination fees ranging from 1% to 12% of the loan amount, which can affect the overall cost of the loan [18][20] Loan Features - Most personal loans are unsecured, meaning no collateral is required, which reduces the risk of asset loss but can impact credit scores if payments are missed [10][11] - Quick funding options are available, with some lenders providing same-day funding, making personal loans suitable for emergencies [8][9] - Personal loans can be used for various purposes, including debt consolidation, home improvements, and emergency expenses, offering flexibility compared to specific-use loans like auto loans [13][14] Advantages and Disadvantages - Personal loans can improve credit scores by consolidating high-interest debt, thus enhancing the credit utilization ratio [15][25] - However, they come with rigid repayment schedules that may strain budgets if not managed properly, and borrowers may face increased debt loads if they do not address underlying financial habits [21][22][17] - The inability to reuse credit from personal loans, as opposed to credit cards, means borrowers must be cautious about their spending habits post-loan [23] Considerations for Borrowers - A strong credit score and stable income are essential for qualifying for favorable loan terms [32] - Borrowers should assess their ability to make monthly payments comfortably and consider alternatives if their financial situation is unstable [32][33] - It is crucial to compare interest rates and loan terms, as well as understand all fees and penalties before committing to a personal loan [34]