How do personal loans work?


Person signing a loan document
Consumers personal loans

Whether you’re looking to consolidate debt, fix up your house, or handle any other major expense, Consumers offers personal loans with competitive rates.

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Discover how flexible personal loans are and how to apply for one.

People from all walks of life use personal loans for all kinds of reasons. To buy a car or boat. Consolidate high-interest debt. Pay tuition. Personal loans are widely used because they offer people the flexibility to do whatever they want. Here’s what you need to know about personal loans.

Your income and expenditures

Lenders will ask for proof of income that shows you can repay a loan. Documents like pay stubs, W-2s or a letter from your employer stating your salary can be used to show income. If you’re self-employed, lenders will ask for tax returns from the last two years.

Your income can come from more than one source. A lender will consider documented income from a side hustle, child support or a retirement account when making a personal loan decision.

In addition to money coming in, lenders look at how much you have in monthly debt obligations. This includes things like credit cards, mortgage payments, auto loans and medical debt. Lenders use this information and your income to calculate your debt-to-income ratio. The lower the ratio, the more willing they are to lend.

Credit scores matter

One key factor in your ability to get a personal loan is your credit score. It reflects how you’ve handled finances in the past—things like making rent payments, paying student loans or handling credit cards responsibly.

The higher your credit score, the more likely you are to be approved for a loan. Plus, higher credit scores help you get the best rates.

The difference between secured and unsecured loans

A loan is secured if you have something of value offered as collateral in case you can’t pay back the loan. For example, with an auto loan, the vehicle itself is collateral. If the loan isn’t repaid, the lender can take possession of it in lieu of receiving payments.

If a loan is unsecured, that simply means that collateral is not part of a lending agreement. With unsecured loans, the lender must use other tools to collect the payment.

Rates vary by personal loan type

Interest rates vary based on what the loan is used for and if the loan is secured or unsecured. Rates also vary based on the interest rates banks themselves are charged for borrowing money (the prime rate). You can see current rates for Consumers personal loans here.

Evaluate total loan costs before you sign

When you check out interest rates, also be sure to check out the fees associated with the loan. Is there an application fee? Can the loan be paid off early without penalty? Evaluate the total cost of the loan as you compare lenders.

At Consumers, there are no application fees and no prepayment penalties for personal loans.

How to apply for a Consumers loan

Applying for a loan is simple. Whether you apply online or in person, you’ll be asked what the loan is for, how much you want, if you’ll use collateral, and questions about your income. If there’s a co-borrower, we’ll ask about their financial situation as well.

Even when you apply online at Consumers, a human looks at your application. Members with the highest credit scores do get the best loans—but even if you don’t have perfect credit, we’ll take a deeper dive to understand your history behind the credit score.

Learn more about personal loans online or give us a call at 800-991-2221.

Consumers provides banking services for more than 108,000 members. If you have banking questions, call us at 800-991-2221. We make it easy to bank how you want, when you want.

Federally insured by NCUA

Consumers personal loans

Whether you’re looking to consolidate debt, fix up your house, or handle any other major expense, Consumers offers personal loans with competitive rates.

Learn more

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