Struggling to make ends meet and manage all your expenses?
Personal installment loans can open the door for more opportunities. In 2025, there was a total of $253 billion in personal loan debt owed across America.
Millions of Americans are turning to personal installment loans to make their lives easier.
BUT (yes, there's a but) there's a right and a wrong way to use these financial power tools.
Let's Get One Thing Straight:
Personal installment loans are not just debt — they're opportunities.
When you take out a personal installment loan for the right reason, you're not just borrowing money.
You're opening up new possibilities. A better credit score. Debt consolidation. Home renovations.
Personal installment loans are a tool — you can use them to create incredible opportunities.
What you'll discover:
What Are Personal Installment Loans?
Why Personal Installment Loans Are The Best Financial Tool You Have
The Smart Ways To Use Personal Installment Loans
How To Get Approved For The Lowest Rates
What are personal installment loans?
A personal installment loan is simply what it sounds like.
You receive a fixed lump sum of money and pay it back in equal payments every month until the loan is paid off. Easy peasy. Simple, right?
Personal installment loans differ from revolving lines of credit, like credit cards, because you don't have an open balance.
Instead, you have:
- A fixed monthly payment — so you know exactly what you'll pay each month
- Set repayment terms — between 12 and 84 months is typical
- A fixed interest rate — your rate won't change during the loan term
- A predictable payoff date — you know exactly when you'll be debt-free
Did you know that most personal installment loans are unsecured?
That means you don't have to offer up your house, your car, or other valuables as collateral to get a personal loan.
Why personal installment loans are the best financial tool you have
Personal installment loans are some of the most powerful financial tools at your disposal.
According to one source, more than 24 million Americans currently have personal loans. That number keeps rising every year.
And here's why…
Credit cards have higher interest rates
Credit card interest rates are at all-time highs right now.
Personal installment loans typically have lower interest rates than credit cards — especially if you have good credit.
This can translate into savings of hundreds or even thousands of dollars over the life of the loan.
Fixed payments make budgeting easy
Credit cards make it hard to budget effectively because your minimum payment keeps changing.
Personal installment loans give you fixed, predictable payments each month. You know exactly how much you'll owe and when you'll be debt-free.
Improve your credit score
Did you know that personal installment loans can build your credit score faster than credit cards?
Payment history makes up 35% of your credit score. If you make timely payments on a personal loan, it helps your credit score improve much faster.
The smart ways to use personal installment loans
Not all reasons to take out a personal installment loan are created equal. Here are the smartest ways to use these loans…
Debt consolidation – #1 Reason to get a personal loan
Listen up. This is huge.
Close to 48.7% of borrowers take out personal loans for one purpose: debt consolidation. That's nearly half.
Why?
Because consolidating your debt can be a total game-changer.
If you have several credit cards (or other high-interest loans) with different interest rates, minimum payments, and due dates, debt consolidation can make your financial life much more manageable.
Here's how debt consolidation works…
You take out one personal installment loan that covers the balance on all your credit cards and other high-interest debt.
Instead of multiple payments with varying amounts and due dates, you now just have one payment.
Here are the benefits of consolidation:
- Lower interest rate — the rate on your personal loan will almost always be lower than your credit cards
- Fixed payment — so no more surprises on your monthly bill
- Clear payoff date — you'll know exactly when the debt will be gone
- Simplified finances — one payment instead of multiple due dates and amounts
Home improvements that add value
Renovating your kitchen? Finishing your basement? Got a dream patio that needs a deck? Personal installment loans can fund all those home improvement projects.
The difference between a personal installment loan and a home equity loan is simple. No waiting weeks for approval. No putting your house on the line.
Emergency expenses
Life is full of surprises. Medical bills, car repairs, and other unexpected expenses can throw your budget into a tailspin.
Personal installment loans can help you access the cash you need when you need it most — without credit card interest rates that rip you off.
How to get approved for the lowest rates
Getting approved for a personal installment loan is pretty straightforward. But getting approved for the best rates takes some work.
Here's what you need to know:
Your credit score matters
Credit scores are important — there's no way around it.
The average personal loan balance is $11,652 but the interest rate you pay can vary widely depending on your credit score.
Excellent credit (720+)? Rates in the 6-8% range. Fair credit (650-699)? Expect 12-18%. Bad credit (below 600)? Forget about it. You won't see rates below 20%.
Get your credit score checked before applying for a loan. If it needs improvement, take some time to raise it before shopping for a loan.
Don't take the first offer you see
Different lenders have different underwriting standards and rate ranges.
One lender might see your credit score as "fair." Another might consider it "good."
Apply with three to four different lenders to get a good sense of what you can qualify for. Most lenders offer rate checks that won't affect your credit score.
Consider your debt-to-income ratio
Lenders want to see that you can afford the monthly payment.
They'll look at your debt-to-income ratio, or your monthly debt payments divided by monthly income. This is their way of gauging your ability to repay.
Debt-to-income ratios of 40% or below are preferred by most lenders. If yours is higher, consider paying off some debt before applying.
Personal installment loan rates by the numbers
Personal installment loan rates have been on the rise over the past few years.
The average rate for a 24-month personal loan has climbed from around 8.73% in 2022 to over 12% today.
I don't want to sugarcoat it: personal loan rates are high right now. But here's the thing…
Personal loans are still one of the cheapest forms of debt out there.
Compared to credit cards and other high-interest loans, a personal loan is practically a steal — especially if you have good credit and can get a low rate.
Shop around and you'll be surprised at what you can find.
Personal installment loans: Dos and don'ts
Personal installment loans are powerful financial tools if used correctly. Here are some common pitfalls to avoid.
Don't take on more debt
The #1 mistake people make with personal installment loans is using them to get out of credit card debt… and then running up those credit cards again.
Don't fall into this trap. Cut up the credit cards if you consolidate the balances on a personal loan.
Be aware of fees
Some lenders charge origination fees, prepayment penalties, and late fees. Be sure to factor in these fees when you're comparing offers.
Don't borrow more than you need
Just because you qualify for a $25,000 loan doesn't mean you should borrow that amount. Only borrow what you need to and can comfortably repay.
Wrapping it all up
Personal installment loans are one of the most effective financial tools available.
Used strategically, they can consolidate your debt, make large expenses more manageable, and help you build credit.
The key is to be strategic in your use of personal installment loans.
Don't jump at the first offer you receive. Compare rates and terms, and only take out a loan that aligns with your financial goals.
The best personal installment loan is the one that helps you improve your financial situation while fitting comfortably in your budget.
If used properly, a personal installment loan can be the first step towards financial freedom.