Personal Loan Types: Find the Right Loan for Your Needs
Personal loan types fall into five main categories based on how they work: secured loans (require collateral for lower rates), unsecured loans (no collateral needed), fixed-rate loans (same payment every month), variable-rate loans (payments can change) and personal lines of credit (borrow as needed). Choose based on your credit score, collateral availability and whether you need funds all at once or over time.
Main types of personal loans
Personal loans fall into several categories. Each type serves different financial needs and credit situations:
- Secured loans—Require collateral, offer lower rates.
- Unsecured loans—No collateral needed, higher rates.
- Fixed-rate loans—Same interest rate throughout the term.
- Variable-rate loans—The rate can change over time.
- Personal lines of credit—Borrow as needed up to the limit.
Find the right personal loan for your financial goals
Life brings new expenses at every stage. Whether you're planning a wedding, fixing your home or dealing with unexpected costs, personal loans can help you manage these financial challenges.
With 25.9 million Americans holding $269 billion in personal loans, according to TransUnion,¹ you're not alone in considering this option. As of year-end 2025, the average borrower owes $11,699² and 79.6% say their loan improved their financial situation.³
This article breaks down the main types of personal loans available, which options work best for different situations and how to choose the right fit for your needs.
What is a personal loan?
A personal loan is money a bank lends you that you repay in equal monthly payments over a specific timeframe. You can use it for almost any purpose—weddings, home repairs, paying off debt, emergencies and more.
Unlike credit cards, personal loans have a fixed end date and usually lower interest rates.
Secured vs. unsecured personal loans
The need to provide collateral is the biggest difference between loan types.
| Feature | Secured loans | Unsecured loans |
|---|---|---|
| Collateral required? | Yes (car, savings, home equity) | No |
| Interest rate range | 6.49%–18%* | 12%–35.99%* |
| Approval speed | 5–10 business days | 1–3 business days |
| Borrowing limit | $100,000+ | Up to $200,000 |
| Best for | Lower credit scores, larger amounts | Good credit, quick access |
| Main risk | Losing your collateral | Higher monthly payments |
IMPORTANT RATE DISCLOSURE: All interest rates shown are examples for illustrative purposes only. Your actual APR (annual percentage rate) will depend on your credit score and credit history, the loan amount and term length, collateral type and value (for secured loans) and current market conditions.
Associated Bank’s interest rates change regularly. Contact us for current rates and terms you qualify for. All rates are subject to change without notice.
Secured personal loans
Best for: Borrowers with lower credit scores or those wanting the lowest possible interest rates.
A secured loan requires you to put up collateral like a home, car, savings account or other valuable asset. This reduces the lender's risk, which typically means lower interest rates for you.
Benefits:
- Lower interest rates
- Easier approval with poor credit
- Higher borrowing limits
Drawbacks:
- Risk of losing your collateral
- Longer approval process
- Limited collateral options
Unsecured personal loans
Best For: Borrowers with good credit who want quick approval without risking assets.
These loans don't require collateral. Lenders base approval on your credit score, income and financial history. Most personal loans fall into this category.
Benefits:
- No collateral at risk
- Faster approval process
- Simpler application
Drawbacks:
- Higher interest rates
- Stricter credit requirements
- Lower borrowing limits
Your credit score plays a huge role in the rates you'll get. Excellent credit borrowers might see rates as low as 6.49%, while those with fair credit could pay up to 35.99%.
Personal loans vs. personal lines of credit
Understanding the difference between these two options helps you pick the right financing method.
Traditional Personal Loans
Personal loans give you a lump sum upfront that you repay in fixed monthly payments, while credit cards let you keep borrowing up to your limit. You repay this amount in fixed monthly payments over two to five years.
Best for:
- One-time major expenses
- Debt consolidation
- Fixed project costs
- Borrowers who want predictable payments
Personal line of credit
A line of credit works like a credit card. You get approved for a maximum amount and can borrow what you need, when you need it.
How it works:
- Draw period: 2-5 years to borrow money and make minimum payments
- Repayment period: Up to 10 years to pay off the remaining balance
- Variable rates that change over time
- Credit limits often cap at around $20,000
Best for:
- Ongoing expenses
- Uncertain costs
- Emergency funds
- Flexible borrowing needs
Personal loans typically offer higher borrowing limits (up to $100,000) than lines of credit. However, lines of credit provide greater flexibility to meet changing financial needs.
Fixed-rate vs. variable-rate personal loans
Your interest rate structure affects your monthly payments and total loan cost.
Fixed-rate personal loans
Best for: Borrowers who want predictable payments and protection from rising rates.
Most personal loans come with fixed rates. Your interest rate stays the same for the entire loan term.
Benefits:
- Consistent monthly payments
- Easy budgeting
- Protection from rate increases
- Clear payoff timeline
Variable-rate personal loans
Best for: Borrowers who want potentially lower starting rates and are comfortable with payment changes.
These loans start with lower rates that can change based on market conditions. Rate changes affect your monthly payment amount.
Benefits:
- Lower initial rates
- Potential savings if rates drop
- Rate caps limit increases
Drawbacks:
- Payment amounts can change
- Harder to budget
- Risk of rate increases
How to choose your loan type
Step 1: Decide how much you need
Different loan types have different limits:
- Personal loans: Up to $200,000
- Secured loans: Depends on collateral value
Step 2: Choose between one payment or flexible borrowing
- One lump sum → Personal loan (debt consolidation, major purchase)
- Draw as needed → Personal line of credit (ongoing expenses, emergency)
Step 3: Apply with Associated Bank
Contact us with your credit score, income, and purpose. We'll show you rates and terms for which you qualify.
Lending opportunity
Associated Bank serves all applicants equally, regardless of credit score. While creditworthiness is one factor we evaluate, we also consider income, employment stability, and overall financial profile. If you've been declined elsewhere, we encourage you to apply or contact us to discuss options for your situation.
Joint personal loans and cosigner options
Adding another person to your loan application can help you qualify for better terms or a higher loan amount.
Joint personal loans (Co-borrowers)
Best for: Couples or family members making shared purchases who both have access to funds.
Both applicants share equal responsibility and ownership of the loan.
Benefits:
- Higher borrowing amounts
- Shared loan ownership
- Both can access funds
Cosigned Personal Loans
Best for: Borrowers with limited credit who have someone willing to guarantee the loan.
The cosigner acts as backup if you can't make payments. They don't get access to the loan funds but will be responsible for the loan if you default.
Benefits:
- Easier approval
- Better rates
- Helps build your credit
Important: Joint and cosigned loans affect both people's credit scores. Make sure everyone understands their responsibility before applying.
Common personal loan uses
Personal loans work well for many different expenses. Here are the most popular uses.
Debt consolidation
Best for: People juggling multiple high-interest debts, especially credit cards.
This can combine multiple debts into one monthly payment. Personal loans typically offer lower APRs than credit cards. According to recent Bankrate and Experian data, average personal loan APRs are around 8%⁴ versus 19.2% for credit cards.⁵
Benefits:
- Simplified payments
- Lower interest rates
- Improved credit utilization
- Fixed payoff date
Home improvements
Best for: Homeowners planning renovations
One in five borrowers use personal loans for home improvements and renovations, according to SoFi.
- Common projects:
- Kitchen remodels
- Bathroom updates
- Roof repairs
- HVAC systems
Wedding expenses
Best for: Couples who want to spread wedding costs over time.
Most loans taken out for weddings cover 25-50% of expenses. 82% of those who take out loans for this purpose finance up to half of their total wedding costs.
Popular wedding expenses:
- Venue costs (36% of borrowers)
- Photography and videography (24%)
- Catering and drinks (20%)
Emergency expenses
Best for: Anyone facing unexpected major costs.
Emergency loans help with sudden expenses:
- Major car repairs
- Medical bills
- Home repairs
- Expenses after a job loss
35.1% of borrowers use personal loans for medical bills, making it one of the most common emergency uses.
Other common uses
- Moving and relocation costs
- Funeral expenses
- Education costs
- Major purchases
32.3% of borrowers use loans for everyday living expenses, while 41.1% finance vehicle purchases.
Personal loan alternatives
Before choosing a personal loan, consider these alternatives.
Credit cards vs. personal loans
Best for:
- Ongoing expenses
-
Rewards earning
-
Short-term borrowing (if you can pay off quickly)
-
Small purchase amount
Personal loans are a better choice if …
- You need lower interest rates.
- You want fixed payments.
- You're consolidating debt.
Avoid these personal loan mistakes
Borrowing more than you need
The problem: You’ve qualified for a larger loan than you thought, so you borrow $15,000 instead of $10,000. Now you're paying interest on $5,000 you didn't actually need.
The fix: Only borrow exactly what you need. You can always apply for more later if your plans change.
Not shopping around
The problem: You take the first loan offer you get. You don't realize that other lenders would give you a rate 5% lower, saving you thousands.
The fix: Get quotes from 3-5 lenders. All inquiries within 45 days are generally counted as one hard inquiry on your credit score.
Ignoring the total cost
The problem: You focus only on the monthly payment ($200/month sounds affordable) without realizing you'll pay a substantial amount in interest over five years.
The fix: Always confirm the total amount you'll pay for the loan, not just the monthly payment.
Not reading the fine print
The problem: You try to pay off your loan early but end up being charged hundreds of dollars in fees because of an early payment penalty clause you missed in the loan agreement.
The fix: Always ask about fees before signing. Key fees to look for include early payoff penalties, late payment fees, application fees and prepayment penalties.
Personal loan types to avoid
Some loan types can trap you in expensive debt cycles.
Payday loans and other predatory loans offer short-term loans that come with extremely high fees and interest rates.
Credit card cash advances typically charge higher interest rates than regular purchases and incur additional fees.
Predatory lending warning signs
Watch out for these red flags:
- Guaranteed approval regardless of credit
- Pressure to sign immediately
- Upfront fees
- Unrealistic payment terms
- Door-to-door sales
Why choose Associated Bank for your personal loan?
Local decision-making—Unlike out-of-state online lenders, our loan officers know your community and can give your specific situation the personal attention you may need.
Flexible options—We offer all loan types covered in this article: secured, unsecured, fixed, variable and lines of credit.
Competitive rates—Our rates compare favorably with national lenders—and you’ll get the personalized service of a local bank.
Fast approval—Most unsecured loans are approved in one or two business days, and you can see the funds in your account the next business day.
No prepayment penalties—Pay down your loan as quickly as you want, without extra fees.
Relationship banking—We're here before, during, and after your loan with support and guidance.
Ready to start? Call 1-866-536-3222 or visit your local branch to discuss your loan options with a specialist today.
Key takeaways
- Secured loans cost less but require collateral. You'll get lower interest rates if you pledge an asset like a home, car, or savings account, but you risk losing it if you can't repay.
- Unsecured loans are faster. Most personal loans don't require collateral, which means faster approval, though rates will be higher.
- Fixed-rate loans make budgeting easier. Your monthly payment stays the same for the entire loan, so you always know exactly what you'll pay.
- Lines of credit give you flexibility. Borrow only what you need, when you need it. Similar to a credit card, this option is better for ongoing or uncertain expenses.
Personal Loan Types: Find the Right Loan for Your Needs Frequently Asked Questions
What's the difference between a personal loan and a credit card?
Personal fixed rate installment loans give you one lump sum upfront that you repay in fixed, predictable monthly payments at a lower rate. They work best for large one-time expenses.
Credit cards are more flexible for ongoing purchases and let you borrow repeatedly up to your limit, but they do charge a much higher APR than a personal loan.
Can you get a personal loan with little to no credit established?
Yes, but your options are more limited, and rates will be higher.
Consider adding a cosigner with good credit to qualify for better rates or work on improving your credit score before applying. Avoid payday loans and other predatory lenders; they charge even higher rates and often trap borrowers in debt cycles.
How long does it take to get approved for a personal loan?
Unsecured personal loans typically get approved within one to three business days, with funds reaching your account the same day or next business day. Secured personal loans take longer—usually 5-10 business days—because the lender needs to verify the collateral value.
The timeline also depends on how quickly you provide the required documentation (pay stubs, tax returns and identification).
What credit score do you need for a personal loan?
This can vary by lender, it is a good idea to apply and discuss with your lender what your options may be.
Should you pay off a personal loan early?
Yes, if you can afford it. You'll save money on interest charges. Most personal loans have no prepayment penalties, so you won't get charged extra fees for paying it off ahead of schedule.
For example, paying off a $10,000 loan in three years instead of five years saves you thousands in interest. However, personal loans may have a prepayment penalty, always ask your lender about prepayment penalties before signing any loan agreement. Associated bank does not charge a prepayment penalty. Always ask about prepayment penalties before signing any loan agreement.
What are the disadvantages of a personal loan?
Personal unsecured loans typically have higher interest rates than secured options like home equity loans or auto loans. You'll still pay interest even if you only need the money temporarily, which can make short-term borrowing more expensive than alternatives like credit cards.
Is a personal line of credit better than a personal loan?
The answer lies in how you'll use the money: gradual or uncertain needs = line of credit; one large expense = personal loan.
A personal line of credit is better if you have ongoing or unpredictable expenses. Lines of credit let you borrow only what you need when you need it (like a credit card). They offer great flexibility but variable rates can change over time.
A personal loan is better for one-time, large expenses. You’ll get the full amount upfront. They usually offer higher borrowing limits (up to $200,000) and lower interest rates, making them better for debt consolidation.
Can two people apply for one personal loan together?
Yes, two people can apply for one personal loan together as co-borrowers (also called a joint loan); both have equal access to the funds and responsibility for repayment. This is different from a cosigner who guarantees the loan but doesn't receive the money.
Sources
1. https://newsroom.transunion.com/q3-2025-ciir
2. https://www.lendingtree.com/personal/personal-loans-statistics
3. https://www.self.inc/info/personal-loan-statistics
4. https://www.bankrate.com/loans/personal-loans/average-personal-loan-rates
5. https://www.experian.com/blogs/ask-experian/research/current-credit-card-interest-rate
