A personal loan can be a great way to pay for an emergency expense, a vacation, a home improvement project, and more. Personal loans are generally cheaper than credit cards, and if you have good or better credit, they are often easy to get. Banks offer them, as do credit unions, fintechs, and scores of online lenders. There are even lenders that specialize in loans for borrowers with bad credit. Sifting through all those options can make a simple process like getting an unsecured personal loan a challenging one.

To help you find a personal loan that meets your needs, we put 70 lenders through a rigorous evaluation process. We also asked hundreds of current and former personal loan borrowers to tell us about their experience and used that information to help us develop our ratings methodology.

 

Comprehensive Data Collection and Review Process

We followed a robust data collection and quantitative evaluation process. In all, we collected 31 data points from each of 60 personal loan lenders and 10 finance companies. Our research team began with media outreach, followed by online research, and customer calls to verify and fill in any gaps. The collection process ran from Aug. 4-23, 2023.

We also conducted a consumer survey to gauge borrower opinion and experience with the lenders in our collection, and to understand what personal loan features and criteria are most important to people. We conducted the survey, and follow up interviews, between Aug. 14, 2023 and Sept. 15, 2023. Participants in our 2023 personal loans consumer survey opted-in to an online, self-administered questionnaire from a market research vendor. In all, 962 borrowers participated in the survey, and 17 semi-structured interviews were conducted with respondents. This data also informed the weightings in our evaluation.

 

Data Collection and Scoring

After collection and verification, we scored 24 of the 31 criteria—in all 1,680 data points were considered in the rankings. Some questions were informational and some, like prepayment fees, did not highlight differences between lenders (none of the lenders we researched charge prepayment fees); those features were not scored. We used the following method to generate our rankings:

  • Data points are scored on a 0.00–1.00 scale
  • Binary criteria (such as Yes/No) = 1 or 0
  • Discrete scale criteria (such as a 5-point scale) = 0.00, 0.25, 0.50, 0.75, 1.00
  • Continuous scale criteria (such as APRs): The minimum value in the range is re-scaled to 0.00 and maximum value is re-scaled to 1.00.

 

Personal Loan Evaluation Categories

Based on the Investopedia editorial team’s subject matter expertise, we developed the following category weights:

Each category consisted of several select criteria:

 

How Investopedia Ranks Personal Loan Features

We assigned weights to each criteria, which we applied to the raw score. A weight of 8%, for example, means that criteria is worth 8% of the lender’s total score.

 

Loan Costs

Respondents in our survey said loan cost is the most important factor when shopping for a personal loan. It’s also the most important category in our scoring (29.5% of total score). To evaluate loan costs, we looked at the following features:

Minimum and Maximum Fixed APR

The interest rate borrowers pay is the largest piece of the cost of a loan. We scored lenders on both advertised minimum and maximum fixed APRs, using a continuous scale for each.

Minimum and Maximum Origination Fee

Origination fee is another significant cost, although lots of the lenders we evaluated do not charge it. These criteria were also scored using a continuous scale.

Maximum Late Payment Fee

We collected both minimum and maximum penalty fees, but only scored the maximum penalty fee to measure how punitive a lender is to borrowers who pay late. We scored this on a continuous scale.

 

Loan Terms

We scored four criteria in this category for a total weight of 22.25%:

Minimum Days to Receive Funds

Most borrowers don’t want to wait for their funds, particularly during emergencies. We measured this in the number of days to receive funds following approval, and scored lenders on a discrete scale, where the same day (or 0) was scored as 1 and five days was scored as 0.0.

Minimum and Maximum Loan Amount

We collected and scored both minimum and maximum loan amounts and scored each on a continuous scale. Lenders with the lowest minimum and highest maximum earned the best scores.

Maximum Repayment Term

We collected data for both minimum and maximum repayment terms, but chose to focus the weight on the maximum repayment term length only. We scored it on a continuous scale, with the longest term (180 months) earning the highest score. Longer repayment terms can help borrowers manage their finances with lower payments (at the cost of more interest paid over time).

 

Borrowing Requirements

This category represents what lenders are looking for in a borrower—creditworthiness and other factors. Seven of the 24 weighted criteria were in this category, worth 28.50% of the total score.

Co-Signer

A co-signer can help a borrower meet lender underwriting requirements. This was scored on a binary scale where lenders that allowed co-signers scored 1 and those lenders that did not allow a co-signer received a score of 0.

Offers Secured Loans

Personal loans are unsecured, or not backed by collateral. Some lenders allow borrowers to use collateral to help with creditworthiness, or just for lower rates. We scored lenders who did or did not offer secured loans on a binary scale, where Yes = 1 and No = 0.

List of States Available

Not all of the lenders in our database are available to borrowers nationwide, but most do. Those that do earned the highest score. We scored this on a continuous scale, with 51 at the top and  just six at the bottom.

Membership Requirement

All of the credit unions in our database require membership as do some of the banks. We scored this on a binary scale. The high weight (10% of the borrowing requirements category) reflects the exclusivity of the requirement and the added inconvenience. This was scored using a binary scale of 0 (Yes) or 1 (No).

Hard Credit Check Required

We score this criteria on a binary scale of 0 (Yes) or 1 (No). Most lenders perform a hard credit check at some point during the process, which earned them zero points. A few lenders do not perform a “hard” credit check during loan approval, which can be helpful for borrowers with poor credit or no credit at all, and that earned them a point here.

No Credit History

Similar to hard credit checks, some lenders will approve loans for borrowers with no credit history. This was also scored on a binary scale, where those lenders who did lend to those with no credit history received a point, while those lenders who did not were awarded none.

Minimum Credit Score

We applied continuous scoring to this criteria, setting the minimum and maximum in the range to 0.00 and 1.00, respectively. Lower minimum credit scores scored highest. It’s a measure of how strict (or how loose) a lender’s underwriting requirements are.

 

Additional Features

This category, with eight of the 24 criteria we scored, and a total weight of 20% overall, looked at loan features that are helpful to borrowers:

Pre-Qualification/Pre-Approval Available

Pre-qualification allows borrowers to check rates without a hard credit check (and a hit to their credit scores). We scored this on a binary scale, where lenders with pre-qualification earned a point and those without it received none. The relatively high weight reflects how important we think it is that borrowers have the opportunity to shop around.

Refinance Available

We scored this on a binary scale (Yes = 1 and No = 0) based on whether or not a lender will refinance a loan with a different rate or term. We also considered a new loan used to pay off the first to be a refinance.

Creditor Direct Pay

For borrowers using a personal loan to consolidate more expensive debt, having the lender pay creditors directly can be more convenient. It can also result in reduced interest rates. This was scored on a binary scale (Yes = 1 and No = 0).

Restrictions on Loan Use

Nearly all lenders prohibit loan funds from being used for gambling, or investing, or college tuition. This subcategory measures restrictions outside of those common ones. This was scored using a binary scale (Yes = 0 and No = 1).

Allows Joint Applications/Co-Borrowers/Co-Applicants

Co-applicants or co-borrowers are similar to co-signers in that credit factors for both are considered during underwriting. However, co-borrowers both “own” the loan funds and both are equally responsible for repaying it. Co-signers have no claim on the funds and only become responsible for repayment if the primary borrower defaults. We consider this an advantage as some borrowers may want to share the benefits of the loan (and the responsibility to repay it) with partners or family. This was scored using a binary scale where those who offered joint applications, co-borrowers, or co-applicants received a point, while those lenders that did not earned none.

Discounts Available

Some lenders offer a variety of rate discounts, such as for maintaining a deposit account or setting up autopay. This was scored on a binary scale where lenders with discounts received a score of 1, while those without received a score of 0.

Reports to All Major Credit Bureaus

Most of the lenders in our database report to all three major credit bureaus, but not all. Consistent, timely loan repayment can help a borrower improve their credit. This was scored on a binary scale where lenders that report to all three bureaus earned a point, and those that do not earned zero.

Credit Insurance Available

Many lenders offer formal programs to help borrowers at risk of default. This might be a pause in repayment for a time or a requirement to only make interest payments. Some are purchased (like insurance), while others are offered as a borrower benefit. This was scored on a binary scale where lenders with some sort of formal program received a score of 1, while those without were awarded 0.

 

Articles That Use Our Methodology

The research and evaluation we’ve done turns up in dozens of personal loan roundups and reviews hosted on Investopedia. You’ll find it in our roundups of the Best Personal Loans and the Best Bad Credit Loans. You’ll also find it in individual lender reviews, like our review of SoFi personal loans or our review of Upgrade personal loans.

 

Meet the Personal Loans Reviews Team

Lars Peterson

Senior Editor, Financial Product Reviews
A black-and-white photograph shows Lars Peterson
Lars Peterson joined Investopedia in 2023 as a senior editor of financial product reviews after four years as an editor with The Balance. Lars’s primary areas of focus are personal loans, credit cards, banking, mortgages, and other financial products and services, with the goal of helping consumers make the most of these offerings while avoiding pitfalls or catches. With nearly 15 years of experience as a writer and editor in personal finance and small business, Lars has written and edited for The Balance, Wise Bread, US News, and Amex OPENForum, among others. His 20+ years as an editor and writer have included roles in book publishing, marketing, technical writing, travel, and personal finance.

Read more

Ben Woolsey

Associate Editorial Director, Financial Products and Services
Ben Woolsey
Ben is an Associate Editorial Director, Financial Products and Services for Investopedia. He is responsible for the news, education, and rating methodologies that Investopedia creates around the various products and services it reviews, including personal loans, mortgages, credit cards, and warranties, among other things. Ben has over 30 years of experience in financial services and has spent his career in marketing, operations, and content managemen