8 Types of Personal Loans Explained

“Personal loan” covers a lot of ground. Here are the 8 main types you’ll come across, and what each one is actually built for.

1. Unsecured personal loan

No collateral required, approval is based on your credit and income. Rates are typically higher than secured loans since the lender takes on more risk.

2. Secured personal loan

Backed by collateral (a savings account, vehicle, or other asset). Usually comes with a lower interest rate since the lender has recourse if you default.

3. Debt consolidation loan

Used to pay off multiple debts (often high-interest credit cards) with a single new loan, ideally at a lower combined interest rate and one monthly payment instead of several.

4. Auto loan

A secured loan specifically for buying a vehicle, with the car itself serving as collateral. Typically comes with lower rates than general personal loans, though your rate still depends heavily on credit score and loan term, see our breakdown of what actually affects your auto loan rate.

5. Student loan

Used for education costs, available as federal loans (with fixed rates and borrower protections) or private loans (rates and terms set by the lender).

6. Payday loan

A short-term, small-dollar loan meant to be repaid by your next paycheck. Interest rates are extremely high, often equivalent to triple-digit APRs, and these are widely considered a last resort, see our guide to spotting a predatory loan before signing anything like this.

7. Home equity loan

Secured against the equity in your home, typically offering lower rates than unsecured loans since your house serves as collateral, but at the risk of foreclosure if you default.

8. Peer-to-peer loan

Funded by individual investors through an online platform rather than a traditional bank, often with a faster approval process and rates based on your credit profile.

Whichever type fits your situation, run the numbers with our loan calculator to see your actual monthly payment and total interest before you sign anything.

What’s the difference between a secured and unsecured loan?

A secured loan requires collateral (like a car or savings account) and usually offers a lower rate. An unsecured loan requires no collateral but is approved based on credit and income, often at a higher rate.

Are debt consolidation loans a good idea?

They can be, if the new loan’s interest rate is meaningfully lower than what you’re currently paying across your existing debts, and if it helps you avoid taking on new debt afterward.

Why are payday loans considered risky?

Payday loans carry extremely high interest rates relative to the loan amount and short repayment window, which can trap borrowers in a cycle of repeat borrowing if not repaid quickly.