A personal loan is a type of unsecured loan provided by financial institutions, such as banks or credit unions, to individuals for various personal expenses. Unlike secured loans, personal loans do not require collateral, making them riskier for lenders, but they are convenient for borrowers who may not own valuable assets to pledge. These loans are typically used for consolidating debt, paying medical bills, financing home improvements, or covering major life events like weddings or vacations.

Personal loans usually have fixed interest rates and set repayment terms, which means the borrower makes consistent monthly payments until the loan is fully paid off. Loan amounts, interest rates, and repayment periods vary depending on the borrower's credit score, income, and financial history.

Advantages of a personal loan include predictable payments and a lower interest rate compared to credit cards. However, failure to repay on time can lead to penalties, a negative impact on the borrower's credit score, and even legal consequences in extreme cases.