How Do Personal Loans Work?

February 20, 2019

When a person needs funding that is versatile, they may look to personal loans. Before getting a personal loan, it may be helpful to understand exactly how the process works.

The convenient thing about personal loans is that they have a pretty easy inquiry process. Understanding how that process unfolds is easy as well. In this article is a simple explanation of how personal loans work from beginning to end.

What Does a Potential Borrower Need for a Personal Loan?

In order to get a personal loan, a potential borrower will need to provide a few pieces of important information. Here is what most people will generally need when inquiring for a personal loan:

  • A government issued photo ID (driver’s license, state ID, passport, etc.)
  • Proof of residence (lease agreement, utility mail, etc.)
  • Proof of income (bank statements, letters of income, etc.)

What Kinds of Personal Loans Are Out There?

There are generally two kinds of personal loans out there:

Secured Personal Loans

Secured personal loans require the borrower to provide an asset. This is usually done when a borrower does not meet the set requirements of credit score for eligibility. The asset adds security for the lender and makes the loan available for the borrower. The asset involved can be anything from a home to jewelry.

Unsecured Personal Loans

Unsecured personal loans are similar to the traditional lending process. Unsecured loans are an agreement between the lender and the borrower, without an asset. Those with fair to very good credit, are eligible for these kinds of personal loans.

The Characteristics of a Personal Loans

Here are some of the characteristics of most personal loans:

  • The funding can be used for a variety of reasons.
  • The average interest rates are from 5% to 36% of the loan.
  • Generally, these loans last from one to five years.
  • Loan amounts can vary greatly—hundreds to thousands.
  • The process can take a few days up to a week (depending on the lender and if there is a credit check).

How Does the Personal Loan Repayment Work?

Like a lot of other loans, personal loan repayment plans will vary quite a bit. It is up to the lender and the borrower to come up with terms that will work for both.

How Personal Loan Lenders Determine Eligibility

Like every other kind of lending, there are a few qualifying factors that personal loan lenders will look at to determine eligibility:

A Credit Score/Credit History

A credit score will showcase a potential borrower’s financial habits and their level of risk. Lenders use credit scores to get a sense of the risk they are taking when working with an individual. For those with a low credit score, lenders may offer a secured personal loan instead of an unsecured one.


The lender will ask about and require proof of a potential borrower’s monthly and annual income. This is an important factor for eligibility because the lender needs to know whether a borrower has steady income to keep up with the monthly payments associated with the loan.

Ability to Repay the Loan

This final determining factor is a combination of the other factors listed above, while also being its own variable. Lenders will factor in all the information that the borrower gives them to then answer the question of whether the potential borrower can reliably pay back the loan or not.

Along with eligibility, these factors will also impact the interest rates and the repayment plan that the lender and borrower agree on.

Where Can I Find A Personal Loan?

There are generally two ways to get a personal loan:

Direct Lender

These are lenders that give out the loan themselves. These are the most common types of lenders out there, and include financial institutions such as banks, credit unions, and some independent lenders. Direct lenders usually have fixed terms for eligibility requirements.

Indirect Lender

Indirect lenders, like MaxCash cannot give out loans themselves but instead work with a group of trusted direct lenders. Indirect lenders are usually independent companies who generally operate online or over the phone. Some are able to give out all kinds of loans. Indirect lenders have flexibility with eligibility and offer a variety for several other aspects of a personal loan.

If an individual is looking for a personal loan, it may be helpful to know about how they work. Personal loans are one of the most common types of loans out there. And figuring out how the process works is actually pretty easy.

There are a few required pieces of information that a borrower will need to provide, and then they can begin the process of finding a lender. Personal loans offer borrower’s flexibility in how they can be used and are often sought out for that reason.

The MaxCash website does not offer or provide loans, but rather, it offers a service. It should not be construed as a lending agent or broker. The site does not endorse any lenders and does not charge visitors any fees. The website owners do not evaluate potential lenders’ applications, nor do they approve or deny credit. The MaxCash website does gather applicants’ personal information and transmits it to lenders that are part of the site’s lending network. No one is required to make use of this website, nor are they under any obligation to begin contact with site operators or to attempt to secure a loan with any of the site’s lending partners. Transmission of your financial and personal information on the website in no way obligates lenders to offer you a loan or any other kind of credit product. Be aware that cash transfer times can vary, depending on the lender and the bank you use. It may be necessary to fax information under certain circumstances. All questions about loans, and any concerns you may have should be directed to your lender. These loans are intended as short-term financial solution to satisfy borrowers’ needs for immediate monetary relief. This is not intended to be part of a long-term financial plan for individuals. These services are not offered in all states. Potential borrows may undergo credit check if lenders choose to use any of the major credit reporting bureaus, including Equifax, Trans Union and Experian. They may also use other alternative sources to check credit ratings. Your request for a loan constitutes your agreement and acknowledgement that (A) your personal data may be shared with lenders and perhaps other third-party partners, and (B) lenders can acquire credit bureau reports that detail your credit history. Reports from major credit bureaus, such as Equifax, Experian and TransUnion may be obtained and used to evaluate your reliability as a borrower.

1Loan amounts by the lenders vary based on qualifications.

2Since we do not lend money directly we cannot offer you a solicitation for a loan. In all serviced states we WILL match you with a lender based on the information you provide on this website. We will not charge you for this service and our service is not available in all states. States that are serviced by this Web Site may change from time to time and without notice. Personal Unsecured Loans are not available in all states and all areas.

3Loans such as, Auto Title Loan companies typically do not have pre-payment penalties, but we cannot guarantee that every lender meets this standard. Small Business Loans typically do have pre-payment penalties and occasionally will use your car as collateral to secure the loan. Other types of loans may have pre-payment penalties as well.

4All lenders are responsible for their own interest rates and payment terms. Max Cash has no control over these rates or payments. Use of the work competitive or reasonable does not mean affordable and borrowers should use their own discretion when working directly with the lender.

5The amount of people who applied for a loan and we helped and those who received a loan is not the same. We cannot guarantee we will find a lender who will fund you. Just because you give us information on this web site, in no way do we guarantee you will be approved for a car title loan or any other type of loan. Not all lenders can provide loan amounts you may see on this web site because loan amounts are limited by state law and/or the lender. Some lenders may require you to use a GPS locator device on your car, active all the time, in the circumstance for an auto title loan. They may or may not pay for this or charge you for this. This is up to the lender and we have no control over this policy of the lender. Typically, larger loans or higher risk loans use a GPS.

In some circumstances faxing may be required. Use of your cell phone to receive updates is optional. Please review our privacy policy.

Loans such as Car Title Loans are expensive and you may have other ways to get funding that is less expensive. These types of loans are meant to provide you with short term financing to solve immediate cash needs and should not be considered a long-term solution. Residents of some states may not be eligible for a loan. Rejections for loans are not disclosed to our firm and you may want to contact the lender directly.

Signature and personal loans are only available in Georgia and Florida. Loan amounts differ at locations. Account approval requires satisfaction of all loan eligibility requirements, including a credit inquiry, and, if applicable, motor vehicle appraisal.

Car Title Loan lenders are usually licensed by the State in which you reside. You should consult directly with these regulatory agencies to make sure your lender is licensed and in compliance. These agencies are there to protect you and we advise making sure any lender you receive money from is fully licensed.

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