Personal loans are the most versatile loan type on the consumer lending market. While mortgages, car loans and student loans must be used for a specific purpose, personal loans can be borrowed for debt consolidation, day-to-day living expenses, vacations or credit building, among other things. The terms of personal loans vary as widely as their uses, though term lengths are generally under 10 years and the maximum amount is usually capped at $100,000.
A common use of a personal loan is to consolidate existing credit card debt. Credit card interest can quickly accumulate when the balance isn't paid off, so personal loans are often a more affordable way to pay down debt. Depending on lender, personal loans can either be secured or unsecured. Loans not secured by collateral have higher interest rates, as they're riskier for lenders to make.