A personal loan is money you borrow from a bank, credit union, or online lender and repay over a fixed period, usually in monthly payments.

Here’s the basic process:

1. You apply for a specific amount — say $10,000.

2. The lender checks your finances, typically including your credit history, income, existing debts, and ability to repay.

3. You receive an interest rate and terms. For example, you might get a $10,000 loan at 10% APR for 3 years.

4. You receive the money, usually as a lump sum deposited into your bank account.

5. You make monthly payments consisting of principal (the money you borrowed) plus interest.

6. Once you've made all the required payments, the loan is paid off.

For example, borrowing $10,000 at 10% APR for 3 years would result in a payment of roughly $323/month. Over 36 months, you'd repay about $11,616 total, meaning roughly $1,616 went toward interest.

What determines how expensive it is?

The biggest number to look at is the APR (annual percentage rate). APR incorporates the interest rate and certain loan fees, making it more useful for comparing offers.

Your rate generally depends on things like your credit score/history, income, debt, loan amount, and repayment term. Better-qualified borrowers usually receive lower rates.

Most personal loans are unsecured, meaning you don't put up something like your car or house as collateral. Because the lender is taking more risk, unsecured personal loans can have higher interest rates than secured loans.

One important thing to check is the origination fee. For example, a lender could approve a $10,000 loan but charge a 5% origination fee. Depending on how the fee is structured, you might receive only $9,500 while still being responsible for the loan balance.

If you're considering taking one out, I can also explain what APR is considered good, how much a particular loan would cost per month, and when a personal loan is/isn't a good idea.