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Whether to borrow from a 401(k) or take out a personal loan is a decision that will depend on your unique financial situation and goals. There are several variables to consider. For instance, a loan from a 401(k) can offer a limited amount of cash and reduce your retirement savings, while a personal loan can offer more cash but can impact your credit score.

Here, learn more about these options for accessing cash so you can make the right decision for your needs.

Understanding 401(k) Loans

Retirement plans such as your 401(k) are designed to tuck away money toward expenses during what are known as your golden years. And while you didn’t initially open and contribute to a retirement account to take money out prematurely, if you’re in need of some funds, you might consider a 401(k) loan.

Yes, it’s entirely possible to borrow against your 401(k). While it depends on the specifics of your employer’s plan, you might be able to access the greater of $10,000 or up to half of what’s vested in your account, or $50,000, whichever is less. So someone with less than $10,000 vested in their 401(k) can take out up to $10,000, while someone with a balance of $40,000 could borrow a maximum of $20,000.

Usually, you’ll have up to five years to pay back your loan amount, along with interest. The interest rate and terms of the repayment depend on your employer’s plan. When you repay the 401(k) loan, the principal and interest go back into your account.

How 401(k) Loans Work

Taking out a loan from your 401(k) or the retirement vehicle known as a 403(b) doesn’t require a credit check nor does it show up on your credit report as debt. As mentioned, you’re essentially taking out funds from yourself. There’s no third-party lender involved, so there are fewer steps in the application process. Plus, your loan payments go straight into your retirement plan.

The restrictions and requirements can vary according to your employer’s plan, so it’s probably a good idea to talk to a benefits administrator or rep from the retirement account for specifics.

Pros and Cons of Borrowing From Your 401(k)

Looking at the advantages and downsides of borrowing against your 401(k) can help you decide whether a 401(k) loan is the right financing choice for you.

Pros

First, consider the upsides of borrowing from your 401(k) account:

•   Doesn’t require a credit check: Because you’re taking out a loan against yourself and there’s no outside lender involved, a 401(k) loan doesn’t require a hard credit inquiry, so it won’t negatively impact your credit score.

•   Easier to obtain: These loans can be easier to get, and you don’t have to jump through as many hoops (including the credit check mentioned above) as other forms of financing.

•   Lower interest rate: While this hinges on your credit, borrowing against your 401(k) often comes with a lower interest rate than other financing options, such as taking out what’s known as a personal loan or using your credit card. This means it can cost you less in interest.

Interest rates are set by the fund administrator and are usually the prime rate but may be higher. As of April 2026, the prime rate is 6.75%.

•   Won’t show up on your credit report: Another plus of a 401(k) loan is that it doesn’t show up on your report as a form of debt, so you won’t have to worry about your payment history impacting your credit in any form.

•   No penalties or taxes: As long as you don’t default on the loan, you won’t have to pay the taxes and early withdrawal penalties that come with making early 401(k) distributions. (This is a benefit of taking a 401(k) loan vs. taking a 401(k) distribution, which will trigger taxes and possibly penalty fees if you are under the age of 59½.)

•   Interest goes back to you: While you have to pay interest on your 401(k) loan, that money goes into your retirement account.

Cons

Now, review the potential downsides of taking out a 401(k) loan:

•   Not all 401(k) plans allow loans: Many plans do offer the ability to take out a 401(k) loan, but not all of them. Check with your plan administrator to learn whether this is even a possibility for you before planning on getting funds via this method.

•   You might have to pay back the loan right away: Should you lose your job or change workplaces, you might be required to pay the remaining balance on your loan quickly. That can be a tall order, especially after a major financial blow such as a job loss.

•   Smaller retirement fund: When you take money out of your retirement plan, that means losing out on the money in an account designated for your nest egg. Because the clock will be set back, it may take you longer to hit your retirement savings goals.

•   Missing out on potential earnings: Taking money out of your 401(k) means losing out on any potential growth on that money if it were sitting in the account instead. Although you pay yourself interest on the loan, the earnings on your returns could be more than the interest.

•   Possibility of taxes and penalties: If you don’t pay back your debt in a timely manner, you could owe taxes and penalty fees on it. That’s because it becomes a 401(k) distribution vs. a loan if you don’t keep up with your payments.

•   Lower loan amounts: How much you can borrow from a 401(k) account has limits. Currently, those are the greater of $10,000 or up to half of what’s vested in your account, or $50,000, whichever amount is less. That may or may not suit your needs.

•   Longer funding times: If you’re approved, you’ll typically receive your 401(k) loan within two weeks of submitting your application.

Overview of Personal Loans

Personal loans are a type of installment loan where you’re approved for a certain loan amount and receive the entire amount upfront. Personal loan amounts vary from $1,000 to $100,000 (some large personal loan amounts go even higher), but the exact amount depends on your approval.

You’re responsible for paying off the personal loan during the repayment term, which is usually anywhere between one and seven years. The time you have to pay off the loan depends on the lender and the specifics of your loan.

Personal loans also come with interest (typically, but not always, at a fixed rate). Your rate depends on factors such as the lender, your credit score, your debt-to-income ratio, and other aspects of your finances. As of February 2026, the national average for a 24-month personal loan at a commercial bank is 11.40%.

Types of Personal Loans

There are different types of personal loans to learn about so you can decide which one might be best for you:

•   Secured personal loans: Secured personal loans are loans that are backed up by collateral, such as a car, home, or other valuable property. Should you fall behind on your payments, the lender can seize your collateral to recoup the money. While you risk a valuable possession, secured loans usually have lower credit score requirements and other less stringent financial qualifications. Plus, you can get a higher amount than with an unsecured personal loan.

•   Unsecured personal loans: Unsecured personal loans are loans that don’t require any collateral. They usually have higher credit score requirements and more strict approval criteria than their secured loan counterparts. Unsecured vs. secured personal loans usually have lower amounts available.

•   Fixed-rate personal loan: A fixed-rate personal loan can be unsecured or secured. The interest is the same throughout your loan term, which makes for predictable monthly payments.

•   Variable-rate personal loan: A loan with a variable vs. fixed interest rate, however, can see the interest charges go up and down throughout your repayment term. This means the amount you’ll end up paying in interest on the loan is unknown. Plus, budgeting might be harder, as your monthly payments could change.

Personal loans offer a lot of flexibility. You can use them for various purposes, from funding a major home improvement project to making a big-ticket purchase to financing a wedding or vacation. In some cases, personal loans are geared toward specific purposes:

•   Home improvement loans: A home improvement loan is an unsecured personal loan that can be used for repairs on normal wear and tear, general maintenance, or toward a renovation project.

•   Debt consolidation loans: Debt consolidation loans are used to take multiple loans and lump them together into a new, single personal loan. The main benefits are that debt consolidation loans can potentially lower your interest rate, monthly payment, or both.

Advantages and Disadvantages of Personal Loans

Next, take a look at the pluses and minuses of personal loans.

Pros

•   Quicker access to funding: You might be able to tap into the funds of your personal loan as soon as one hour after approval, though you’ll likely receive funds within 1-5 days. So, if you need money in a flash, this could be a good option for you.

•   Flexible amounts and repayment terms: Unlike 401(k) loans, where there’s a maximum borrowing limit of $50,000 and a repayment term of five years, personal loans have a wide range of borrowing amounts and repayment periods. You’ll likely have a better chance of finding a personal loan that’s a good fit for your time frame vs. with a personal loan.

•   Lower interest than other financing options: The interest rate of a personal loan can range from around 6%-36%, and the average rate on 24-month personal loans at commercial banks stands at 11.40% as of February 2026. While they might not be lower than the 401(k) loan rate, personal loan rates can be lower than using a credit card or payday loan to make purchases.

Cons

•   Impacts your credit score: When you take out a personal loan, the lender needs to do a hard pull on your credit. This usually reduces your credit score by a few points and will impact your score for a few months.

Also, since your payments are reported to the credit bureaus, if you fail to keep up with payments, your score could be dinged.

Taking on a loan also drives up your credit utilization, which can also negatively impact your score.

•   Fees and penalties: Some personal loans have origination fees, which can add to your loan amount and your debt. Plus, you might incur late fees. On the flip side, the lender could charge a prepayment penalty if you’re ahead of schedule on your payments. This is to recoup any losses they would’ve earned on the interest.

•   Additional debt: While a 401(k) loan is an additional financial responsibility, personal loan debt means making payments and owing interest that doesn’t go back to you. Instead, you’ll be on the hook for payments until the loan is paid off.

Recommended: Personal Loan Calculator

Key Comparison Factors

Here are key factors to compare when evaluating taking out a personal loan vs. a 401(k) loan:

•   Interest rate: The higher the interest rate, the more you’ll pay for the same amount of borrowed money.

•   Repayment term: The shorter the repayment term, the higher the payments. Conversely, the longer the repayment term, the lower the payments (but you’re likely to pay more interest over the life of the loan).

•   Impact on retirement savings: You’ll want to weigh the different ways a loan can eat into your retirement goals. For example, a 401(k) loan will shrink your retirement fund. However, if you take out a personal loan, you may have less cash available to put toward retirement since you need to make your monthly payments.

•   Credit score implications: Understanding how taking out either loan can impact your credit score is important, especially if you are building your credit score. A 401(k) loan doesn’t require a hard credit pull nor will payments show up on your credit report. A personal loan, however, does require a hard credit inquiry, and late payments will end up on your credit file and can lower your score.

•   Tax considerations: If and when you’ll be taxed is also something to consider. As for whether a personal loan is taxable, the answer is usually no. But a 401(k) loan could be taxable if you fail to meet certain loan requirements, such as sticking to your repayment schedule.

Scenarios: When to Choose Each Option

If you are contemplating the choice of taking a 401(k) loan or a personal loan, reviewing these scenarios could help you make your decision.

401(k) loan

Going with a 401(k) loan might make more financial sense in these scenarios:

•   You’re far off from retirement. You likely have time to pay back the loan and replenish your account, which can help you hit your target amounts within your desired time frame.

•   You can repay the loan in five years. If the time frame and loan amount aren’t suitable and you fall behind with payments, the amount you owe can be treated as a distribution, and you’ll be hit with early withdrawal penalties and taxes.

•   Your credit score doesn’t qualify you for a personal loan with favorable terms. A hard credit inquiry isn’t part of tapping funds from 401(k) retirement savings.

•   You don’t want to borrow from a lender (with a 401(k) loan you are, in a sense, borrowing from yourself), and you feel confident you can stay on top of your payments.

Personal loan

A personal loan might be the stronger choice in these situations:

•   You want quicker access to the funds. You may be able to apply, be approved, and access personal loan funds within just a few days. A 401(k) loan can take a couple of weeks to move funds into your bank account. You will, of course, need to meet the lender’s criteria, such as minimum credit score and debt-to-income requirements.

•   You are hoping to borrow more than the $50,000 cap on 401(k) loans. A personal loan may allow you to access twice that amount.

•   You feel you might be changing jobs soon or that your job is in jeopardy. If you leave or lose your job, a 401(k) loan could be due in less than the five-year term.

With either option, you want to make sure you have a steady income to repay the loan. It’s important to prioritize paying off the loan. Otherwise, you may potentially get hit with fees and/or damage to your credit score.

Long-Term Financial Impact

Borrowing from a 401(k) vs. taking out a personal loan can have a different long-term impact on your money situation. In deciding between the two, you’ll want to take a close look at the following:

Effect on retirement savings: Taking out a 401(k) loan means a reduction to your retirement fund, potentially a loss in growth in your investments, and possibly also a setback to your retirement goals. While a personal loan doesn’t have the same impact on your retirement savings, having less money freed up each month can mean you’ll have less to contribute to a tax-advantaged retirement account.

Potential opportunity costs: Taking on more debt, whether against your retirement account or a loan through a lender, means your money will be tied up in debt repayments. In turn, you might miss out on opportunities to boost your finances, whether that’s putting money toward education, a business venture, your savings, or an investment account.

Debt management considerations: With a 401(k) loan, you’ll want to feel comfortable that you can shore up your retirement funds by paying off the amount within five years. You’ll be required to make payments at least once a quarter. With a personal loan, the monthly payment and repayment term can vary, but you’ll want to make sure both are a good fit for your budget and goals.

The Takeaway

In deciding whether to borrow a 401(k) loan or a personal loan, you’ll want to understand the basics of how each works, their respective advantages and disadvantages, and what factors to consider before landing on the best choice for you. A 401(k) loan can avoid the potential negative credit impact of a personal loan, for instance, but there is a limit to how much you can borrow, which could sway your decision.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. See your rate in minutes.

FAQ

What happens to my 401(k) loan if I leave my job?

If you lose your job or change workplaces, you might be required to pay back the remaining balance on your 401(k) quickly. If you are deciding between a personal loan and a 401(k) loan and feel you might be changing jobs soon, a personal loan could be the better option.

Can I take out multiple 401(k) loans?

Most plans only allow you to have one 401(k) at a time, and you must pay it back before you can take out another one. However, it’s worthwhile to check with your plan administrator, as you might be allowed to take more than one, as long as the total between the two doesn’t go over the plan’s limit, which is typically $50,000.

How does each option affect my credit score?

A 401(k) loan doesn’t require a hard pull of your credit nor do your payments show up on your credit report, and it therefore doesn’t affect your credit score. A personal loan does trigger a hard credit inquiry, and late or missed payments on your personal loan can negatively impact your score. Plus, taking on a personal loan increases your credit utilization ratio, which can also lower your score.

Photo credit: iStock/JulPo

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SOPL-Q226-002

If you’re strapped for cash and have a hard time qualifying for traditional loans, or you live in an underbanked area, you may be considering a pawnshop loan. They appear to be a convenient option for fast cash, but they can also come with significant disadvantages, including high costs.

Before putting your valuables down in pawn, learn more about what pawnshop loans are so you can understand how pawning works.

What Is a Pawnshop Loan?

A pawnshop loan is a secured (vs. unsecured) loan, also known as a collateralized loan. To comprehend how this type of loan works, you’ll need to understand how does pawning work: To borrow the money, you must produce an item of value as collateral that provides backing for the loan. You and the pawn shop and loan operator, known as a pawnbroker, agree to a loan amount and a term. If you don’t pay back the loan (plus fees) within the agreed amount of time, the pawnshop can sell the item to recoup its losses.

Pawnshops will typically offer you 25% to 60% of the resale value of an item. The average size of a pawnshop loan is $150 with a term of around 30 days.

What Items Can You Pawn?

Items that can be pawned include jewelry, musical instruments, electronics, or antiques. It’s even possible to pawn the title to a vehicle. The pawnbroker will determine whether or not an item can be pawned, and borrowers can bring practically any possession for the broker’s scrutiny.

Recommended: No Credit Check Loans Guide

How Does Pawning Work?

Take a look at this example to see how pawning works: Say you bring in a $600 guitar to a pawnshop. The pawnbroker might offer you 25% of the resale value, or $150. On top of that, it would not be unusual for the pawnshop to charge a financing fee of 25% of the loan. That means you’ll owe $37.50 in financing fees, or $187.50 in total.

If you agree to the loan, the pawnbroker will typically give you cash immediately. The broker will also provide you with a pawn ticket, which acts as a receipt for the item you’ve pawned. Keep that ticket in a safe place. If you lose it, you may not be able to retrieve your item.

You’ll usually have 30 to 60 days to repay your loan and claim your item. According to the National Pawnbrokers Association, 85% of people manage to do this successfully. Nevertheless a pawnshop loan is considered a kind of high-risk personal loan, in that the borrower has a higher than average chance of defaulting. When a borrower pays off a pawnshop loan, they can retrieve the item they pawned. If a loan isn’t repaid, the pawnshop will keep the item and put it up for sale. There is no other penalty for failing to pay off your loan, but you do lose your item permanently.

Pawnshop Loan Fees and Interest Rates

Pawnshops don’t typically charge interest on the loans they offer. However, the borrower is responsible for paying financing fees or storage fees that can make the cost of borrowing higher than other loan options. Aside from the need for collateral, there are few other requirements to qualify for a pawnshop loan. You typically don’t need to prove your income or submit to a credit check.

Regulations around what pawnshops can charge vary by state, but you could end up paying the equivalent of many times the interest charged by conventional loans.

Recommended: How to Avoid Predatory Loans

Pros and Cons of Pawnshop Loans

In general, it’s best to seek traditional forms of lending, such as a personal loan from a bank, credit union, or online lender, if you can. These loans tend to be cheaper and can help you build credit. However, if you need cash the same day and you don’t qualify for other loans — and have a possession you are willing to risk losing — you might consider a pawnshop loan. Carefully weigh the pros and cons to help you make your decision.

Pros of a Pawnshop Loan

•   Access to cash quickly. When you agree to a pawnshop loan, the pawn shop and loan broker will typically hand over cash immediately.

•   No qualifications. The ability to provide an object of value is often the only qualification for a pawnshop loan.

•   Failure to pay doesn’t hurt credit. While you will certainly lose the item that you put in pawn if you don’t pay back your loan, there are no other ramifications. Your credit score will not take a hit.

•   Loans aren’t sent to collections. If you don’t pay back your loan, no collections agency will hound you until you pay.

Recommended: How Do Collection Agencies Work?

Cons of a Pawnshop Loan

•   High fees. The financing fees associated with pawn lending can be much more expensive than traditional methods of obtaining credit, including credit cards and personal loans. Consider that the average annual percentage rate (APR) on a personal loan is currently 11.40%, whereas pawnshop financing fees, when converted into an APR, can be 200% or more.

•   Loans are relatively small. The average size of a pawnshop loan is just $150. If you need money to cover a more costly expense, you may end up scrambling for cash elsewhere.

•   You won’t build credit. Pawn lending isn’t reported to the credit reporting bureaus, so paying them off on time doesn’t benefit your credit.

•   You may lose your item. If you can’t come up with the money by the due date, you’ll lose the item you put in pawn. (Same if you lose your pawn ticket.)

Pros and Cons at a Glance

What Is a Pawnshop Title Loan?

As noted above, it’s possible to pawn a vehicle if you wish to do so. A pawnshop title loan is a loan in which you use the title of your car as collateral for your loan. You can typically continue driving your vehicle over the course of the loan agreement. However, as with other pawnshop loans, if you fail to repay your loan on time, the pawnbroker can seize your car.

Typical Requirements to Get a Loan Through a Pawnshop

There are typically few requirements to get a pawnshop loan, since the loan is collateralized by the item you put in pawn and the pawnbroker holds on to that item over the course of the loan. Business is done in cash so you don’t need a bank account to get a loan. However, pawnbrokers do want to avoid dealing in stolen goods, so they may require that you show some proof of ownership, such as a receipt.

Alternative Loan Options

There are a number of benefits of personal loans that make them a good alternative to pawnshop loans. Personal loans are usually unsecured, meaning there is usually no collateral required for a personal loan. Lenders will typically run a credit check, and borrowers with good credit scores usually qualify for the best terms and interest rates. That said, some lenders offer personal loans for people with bad credit.

If you qualify for a personal loan, the loan amount will be given to you in a lump sum, which you then typically repay (plus interest) in monthly installments over the term of the loan, often two to seven years. The money can be used for virtually any purpose.

Personal loans payments are reported to the credit reporting bureaus, unlike pawnshop transactions, and on-time payments can help you build a positive credit profile.

Other alternatives, such as payday loans may have very high interest rates that make them a less attractive way to borrow.

The Takeaway

If you only need a small amount of money, you don’t qualify for other credit, or if you’re looking for a loan without a bank account, you may consider a pawnshop loan. Just beware that they are potentially costly alternatives to other forms of credit, and if you don’t repay the loan you will lose the item you have pawned.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. See your rate in minutes.

FAQ

How is a loan obtained through a pawnshop?

To borrow money from a pawnshop you must present an item of value that can act as collateral for the loan. The pawnbroker may then provide a loan based on the value of that item.

What happens if you don’t pay back your pawnshop loan?

If you fail to pay back your pawnshop loan on time, you won’t be able to reclaim the item you put up as collateral for the loan. The pawnshop will sell it to recoup their losses.

What’s the most a pawnshop loan will pay?

On average, a pawnshop will loan you about 25% to 60% of an item’s resale value. The average pawnshop loan is $150 and is repaid in about 30 days.

Does a pawn loan affect your credit score?

Pawnshops do not report to the credit bureaus, so taking out a pawnshop loan, repaying a pawnshop loan, or failing to repay the loan and claim your pawned item will not have an impact on your credit score.

How long do you have to repay a pawn loan?

The average term of a pawnshop loan is about 30 days, though pawnshop regulations differ from state to state and policies may differ from pawnshop to pawnshop.

Photo credit: iStock/miriam-doerr

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SOPL-Q226-028

The maturity date for an installment loan like a personal loan is the date on which you should be finished paying off your loan, assuming all payments are made on time and in full. It’s important to mark this day on your calendar, not only so you can celebrate successfully paying back your debt, but also because it can tell you important information like how much you’ll ultimately end up paying in interest.

Here’s a look at how to figure out the maturity date for your personal loan, and other important loan terms you should know.

What Is a Maturity Date On a Loan?

The term “maturity date” can be used with loans or investments. In investing, it refers to the day on which you’ll receive the money you invested, for example, in a savings bond or certificate of deposit (CD). You’ll get your investment back, plus any remaining interest that’s due to you.

If you’re a borrower, the maturity date of loans is the day a lender has scheduled for loaned funds and any interest to be paid off in full. Provided you’ve made regular and timely payments throughout the term of the loan, you’ll have no further obligation to the lender after the maturity date.

If, for whatever reason, you still have a balance after your loan maturity date, you’ll want to talk to your lender and work out a plan to pay off the remainder of your loan.

Recommended: What Is a Personal Loan?

How Does the Loan Maturity Date Work?

Your loan’s maturity date is a part of your initial loan agreement. So “What is a maturity date on a loan?” is not a question you should be asking midway through the loan process. You can find the maturity date on your loan contract. For example, say you take out a $10,000 personal loan on June 1, 2026 with a 36-month term. The loan maturity date will be 36 months later, on June 1, 2029.

It is possible to pay off your loan early before the loan maturity. This can save you money in interest payments. However, be mindful of whether your lender charges prepayment penalties. These penalties can outweigh the advantages of paying off your loan early.

Why Is the Loan Maturity Date Important?

The maturity date of a loan is its last major milestone. But choosing the personal loan term length that dictates the maturity date is an early step in the loan process. The maturity date is important because the length of time you have to pay off a loan, along with the loan amount and interest rate, are the things that determine your borrowing costs.

Length of a Personal Loan Maturity Date

The loan term is usually calculated in months. You can often find personal loans with terms from 12 to 60 months, and some lenders will offer loans with terms of up to seven years or longer.

The longer your term, the longer you’ll be paying interest, which generally makes longer-term loans more expensive for borrowers. When choosing a loan, you may want to consider one with the shortest term (and closest maturity date) possible, as long as you can comfortably afford the monthly payments.

Calculating Your Loan Maturity Value

A loan’s maturity value is the sum of what you’ve borrowed plus all of the interest you’ve paid (or will pay) on the loan. The maturity value (MV) formula is:

MV = P + I

Where “P” is the principal amount of the loan (the amount you borrowed) and “I” is the loan’s annual percentage rate (APR).

For example, say you take out a $10,000 personal loan with a 36-month term and 12% APR. In this case P = 10,000 and I = 12%. You would multiply $10,000 by .12 to arrive at the interest, or I — in this case: $1,957.15.

Then you would add the principal and interest to learn your maturity value, like this:

MV = $10,000 + $1,957.15
MV = $11,957.15

You can sidestep all the math by using a personal loan calculator to quickly compute the total costs of borrowing.

What Is an Amortization Schedule?

Your loan’s amount, term, and interest rate will be used to determine the amortization schedule that you may receive when you sign up for a personal loan. The schedule lists each loan payment’s total amount and how much of each payment is applied to interest vs. the loan principal. The amount you pay toward your loan each month will likely be fixed. But the portion of each payment that goes to principal vs. interest will change, with more of the payment going toward interest in the early months of the loan’s term.

If you refinance a personal loan, you’ll get a new maturity date, interest rate, and amortization schedule.

What Happens at the Personal Loan Maturity Date?

At the personal loan maturity date, you will make your final loan payment. Provided you have stayed on track with all of your payments, you will have fully paid off all of your loan principal and whatever interest you owe and have no further obligation to your lender.

If you think you’ll have trouble making any of your loan payments on time, it’s a good idea to reach out to your lender immediately and see if there’s anything it can do to help. The lender may allow you to pay at a later date.

Recommended: What Happens If You Default on a Personal Loan?

Other Key Loan Terms to Know

In addition to maturity and the principal amount, you’ll find other useful information on your personal loan agreement.

Loan Interest Rates

The interest rate is the amount that your lender charges you to borrow, and it’s the main way that lenders make money. Most personal loans rates are fixed interest rates, meaning the rate will not change over the life of the loan. The average personal loan interest rate is currently 11.40%. But rates will vary depending on your credit score.

Variable rate loans, on the other hand, carry interest rates that are usually pegged to a market interest rate. As a result, they can change over the life of the loan.

There may also be hybrid situations in which a loan starts with a fixed interest rate for a period of time, after which it switches to a variable rate. If market rates have gone down, this can be a good thing for borrowers. But if they’ve gone up, a variable-rate loan could be more expensive than its fixed-rate counterpart.

Recommended: What Is an Installment Loan and How Does It Work?

Monthly Loan Payments

You’ll be able to find the amount you owe each month on your personal loan agreement. Your loan payment should be the same over the course of your loan unless you have a variable interest rate.

Prepayment Penalties

If you’re wondering whether you can pay off a personal loan early, the answer is yes. Whether or not it makes sense to do so will depend on your loan agreement and the details of any prepayment penalties. Lenders may charge a fee based on the amount of interest you would have paid had you continued with regularly scheduled payment, or they may charge a flat fee or percentage of your remaining balance.

To avoid a prepayment penalty, read your loan agreement carefully before committing to a loan, as lenders handle prepayment differently. If you are midway through the life of the loan, it still pays to look at the loan agreement. Some lenders’ agreements allow a partial prepayment, which would reduce your interest costs. It’s possible the penalty will be less than the interest you would pay if you stuck with the payment schedule. Contact your lender to see if you can negotiate a reduced or waived penalty.

Paying off your loan early could hurt your credit score somewhat, as you will stop making regular payments on the loan and your credit utilization will change. However, if you can save money on interest by paying off the loan, it’s still a smart move to do so. Keep up the good financial habits that helped you pay the loan off early and your credit score should recover.

The Takeaway

For an installment loan like a personal loan, the maturity date of loan is the day of the final loan payment. This date is set based on the loan’s repayment period — how long you have to repay the loan, including both principal and interest. A personal loan is typically considered to have short- to medium-term maturity, since terms generally run from a few months to seven years.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. See your rate in minutes.

FAQ

What happens if the loan is not paid by the maturity date?

If your loan is not paid by the maturity date, you’ll need to work with your lender to come up with an extended repayment plan. If your last loan payment is late or your loan is in default, you may face penalties and your credit score may be negatively affected.

What is the maturity date on a loan?

The maturity date on a loan is the date by which a borrower has agreed to pay off the loan principal and interest in full. You generally make your final loan payment on the maturity date.

When is the maturity date on a loan?

The maturity date on a loan is the date when your final payment is due. It is based on the term of your loan. If you take out a personal loan on June 1, 2026 and the loan has a 36-month term, for example, the maturity date will be June 1, 2029.

Can you change the maturity date on a loan?

It may be possible to extend the maturity date on your loan through a process called loan modification. This is most often done in cases of financial hardship, when extending the date can help make payments more manageable. You could also consider refinancing the loan; though this is often done to obtain a lower interest rate, it could also allow you to make your loan term longer or shorter.

How does the loan maturity date affect my monthly payments?

The loan maturity date is the end point of your loan term, the number of months you have to repay what you have borrowed, with interest. The longer your loan term, the lower your monthly payments will typically be, but the more interest you will pay over the life of the loan. So a close-in maturity date usually means higher monthly payments and lower total interest.

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SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

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On the popular credit score spectrum of 300 to 850, a credit score of 579 or lower is usually classified as poor, and a score between 580 and 669 is considered fair. Only when a score is 670 or higher does it typically count as good. That said, each lender makes its own determination of which credit scores are considered risky.

Here, you’ll learn more about the different credit score requirements and the factors that can build your score so you can work toward better financial habits.

What Is Considered a Bad Credit Score?

The definition of a bad credit score is having a history of late or unpaid bills or borrowing too much money. This past behavior can indicate that you are a poor credit risk, which might deter lenders from doing business with you or restrict your ability to access the lowest available interest rate. When computing your credit score, agencies may also look at the mix of different types of credit you have (mortgage, personal loan, credit card, etc.) and also how long you have been a credit user.

What Is the Bad Credit Score Range

A bad or poor credit score isn’t a single number. Rather, it’s a range. In the case of the popular FICO® Score system, a bad credit score would be one that is 579 or below. FICO calls this a poor score, noting that it is well below the average score of a U.S. consumer, which in late 2025 was 715. (The next highest category, fair, ranges from 580 to 669.)

Credit Score Ranges Explained

Scores are categorized somewhat differently depending on the credit-scoring model being used. Here’s a closer look at two popular systems, FICO and VantageScore®, so you can see how lower scores are ranked in terms of credit score ranges. FICO scores are often referred to because they are used by 90% of top lenders. But some lenders also refer to VantageScore, another credit score company.

To complicate matters, lenders may choose from multiple scoring models and industry-specific scoring models. This can make it tricky to know which one you’re being evaluated on. And your credit scores vary — so, yes, you have multiple scores.

It’s also worth noting that you might have a low credit score if you are new to credit. When you first start accessing credit, however, you don’t start at zero (or 300). Rather, once you have several months of credit usage in your history and have managed it fairly well, you are likely to have a score between 500 and 700.

As noted above, Americans have an average FICO Score of 715 in 2025. The average VantageScore is 701. Both of these scores are in the good range of their respective scales. Let’s take a look at how each of these companies defines its credit score ranges in the two charts below.

FICO Score Ranges

VantageScore Ranges

Consequences of a Bad Credit Score

Having a bad credit score can impact you in several ways:

•   Difficulty in obtaining loans and credit: With a score in a lower range, you will likely look like a poor credit risk to lenders. You will therefore probably not have access to a full array of products, such as conventional mortgages and rewards credit cards, which are usually available to those with higher scores.

•   Higher interest rates and fees: For the forms of credit that you do qualify for, you will likely pay a higher interest rate and more in fees. For instance, as of this writing, credit card offers for people with excellent credit scores would have an average interest rate of 21%, while those with fair credit scores would pay an average of 26%.

•   Impact on renting and employment: Some employers and landlords may check credit scores to see how responsible a candidate for a job or rental unit has been with their finances in the past. A poor score could indicate that an individual does not manage their money and deadlines well, which could be a negative mark on an application.

To look at it from a different angle, here are some of the things that take your credit history into consideration and can be negatively impacted by a bad score:

•   Credit cards

•   Car loans

•   Home loans

•   Personal loans

•   Private student loans

•   Car insurance premiums (in some states)

•   Homeowners insurance

•   Job or rental applications

How to Build Your Credit Score

If you currently have a credit score that is lower than you’d like, there are steps you can take to help build it and enjoy greater access to credit products with more favorable terms. Here are factors that affect your credit score and how to manage them better:

Pay Bills on Time and in Full

Paying your bills on time and in full is the single biggest contributing factor to your credit card, so take it seriously. If you have been late with any payments, consider getting caught up.

If you tend to forget bills, consider brushing up on how autopay works and set up payments through an app, an online bank account, or the entity billing you. Putting reminders on a paper or electronic calendar can help as well.

Reduce Credit Card Balances

Another important factor when it comes to building your credit is to be aware of your credit utilization ratio. Credit utilization involves credit card and other revolving debts, not installment loans like mortgages or student loans. The ratio expresses how your current balances relate to your overall credit limit. Most financial experts recommend that this should be no more than 30%, but under 10% is better still.

Here’s an example: If you have two credit cards, each with a credit limit of $5,000, you have a total credit limit of $10,000. You would want your combined balances to be no more than $3,000, or ideally no more than $1,000.

The Consumer Financial Protection Bureau says that paying off credit card balances in full each month helps to keep the ratio low and positively impact a credit score.

Manage Credit Accounts Carefully

The average age of your accounts plays a role in your credit score, so you may want to keep some of your oldest cards open, even if you don’t use them often. Remember that closing cards also reduces your available credit, affecting your credit utilization ratio.

Opening credit cards affects your credit score as well. Every time you apply, the credit card company runs a hard inquiry on your credit, and your score takes a slight hit. Applying for a bunch of cards in quick succession can lower your score in this way and make it look like your financial situation has taken a turn for the worse.

How Long Does It Take to Improve Your Credit Score?

You’ve just learned about some key factors that can help you build your credit quickly. Here’s a little intel about the timeline to build a credit score: Three major credit reporting agencies — Equifax®, Experian®, and TransUnion® — compile the information on your history of borrowing, and then a company like FICO or VantageScore translates that data into a number.

It’s important to keep in mind that the data contributing to your credit score updates regularly, but you likely won’t see tremendous movement in just one month. You might start to see an uptick in 30 to 45 days, but it can take several months or even years for your good credit habits to pay off. For instance, if you have a credit score of 560, it’s unlikely to surge to a 760 in just a month or two.

Credit-Building Tools

There are some other strategies you might consider if you are eager to build your score:

•   Millions of Americans have no credit score because they don’t have enough of a history to calculate one. If this is your situation, you have a couple of options. You may want to consider taking out a secured credit card that will allow you to access a modest line of credit by putting down a deposit.

•   You can also ask a friend or family member to add you as an authorized user to their credit card account. An authorized user can use the account but does not have any liability for the debt. A positive payment history on the card you are added to can help build your score.

Recommended: Secured vs. Unsecured Personal Loans

Maintaining a Good Credit Score

As your score reaches a range you’re happy with, you’ll want to maintain it to stay in good standing. Some tips:

•   Regularly check your credit report to look for errors. Report any that you find.

•   Avoid excessive credit applications. Each hard inquiry typically lowers your score by several points for a few months. Think twice before biting when various credit card offers come your way.

•   Use credit responsibly. Keep an eye on your credit utilization ratio and bill payment due dates. If your credit card balances are rising, prioritize paying them down with, say, the debt snowball or avalanche method. Or you might consider a personal loan known as a debt consolidation loan, that may offer a lower interest rate (and therefore more affordable payments) and the convenience of just paying one bill per month.

Recommended: What Credit Score Is Needed for a Personal Loan?

Options for Borrowing With Bad Credit

If your credit score is in the lower range and you need to borrow money, the cost of borrowing may be higher for you, as noted above. But the good news is that borrowing is still possible.

Personal Loans

It is possible to obtain a personal loan if you have bad credit, as roughly 15% of Americans do. Some companies offer loan products specifically for those with lower scores. These might include higher interest rates (in the 30% zone), lower loan amounts than are typically offered (say, $300 vs. $1,000), or other special features. If you can nudge your score to 620, the middle of the “fair” range for FICO, a larger universe of personal loan options may open up for you.

Secured Credit Options

A secured credit card doesn’t just help you build a credit history. It’s also an option if you are having difficulty getting a standard credit card due to a poor credit score. This type of account requires a security deposit, which is refunded when the account is closed. As with a typical credit card, you’ll need to make payments each month. Your record of on-time payments will help develop a credit history.

The Takeaway

A bad credit score range is defined differently by individual lenders and credit bureaus. But a score below 580 on the FICO scale can be deemed bad and make it difficult to qualify for a conventional mortgage and other important financial products. Those forms of credit that you do qualify for will likely cost you money through higher interest rates. But a bad credit score range isn’t always permanent. With time and dedication, you can build your credit score and maintain a higher number.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. See your rate in minutes.

FAQ

Is 600 a bad credit score?

A credit score of 600 falls into the category that’s considered fair credit, which is less desirable than good credit. As such, it could be considered bad by some lenders, though it is above the poor classification (579 and below). A 600 credit score can make it harder to get approved for loans and credit cards, and, if you are approved, you will probably have to pay higher interest rates.

Is under 700 a bad credit score?

A 700 credit score usually falls in the good category, which typically runs from 670 to 739. A fair score is typically from 580 to 669, and a poor score is 579 or below.

Can you get approved with a 500 credit score?

Depending on what you are applying for, it is possible to get approved with a 500 credit score. For instance, you might qualify for certain government-backed mortgages, and you might get approved for, say, a personal loan, but likely at a higher interest rate than if you had a score in a higher range.

What is the lowest credit score possible?

The precise number that is the worst possible credit score varies based on which credit agency you are scored by. But for FICO, the lowest score is anything below 580, while for VantageScore, the lowest score is 300.

How can I improve a bad credit score quickly?

Your debt level and payment history are the largest factors in your credit score, so reducing debt and making consistent payments can help your score. For fast fixes, check your credit report for any errors and request a correction. And because credit utilization (the amount of your available credit that you are using) is a key factor, consider requesting a credit line increase if you feel you can handle more credit responsibly.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

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Personal loans are a type of lending instrument offered through banks, credit unions, and online lenders. They’re paid back, with interest, in installments, and there are few limitations on how the loan funds can be used. They’re also typically unsecured, meaning you don’t have to put up any property as collateral for the loan.

A personal loan is an important financial tool if you can find one from a reputable lender at a reasonable interest rate, and you can commit to making loan payments on time. However, if you only qualify for a loan with a high interest rate or you feel you may have trouble paying it back, you may want to think twice before applying.

Are Personal Loans Bad?

Not necessarily. There are both advantages and disadvantages to personal loans. Here’s a look at some of the benefits of taking out a personal loan:

•   Personal loans generally offer a wide range of borrowing limits, typically between $1,000 and $100,000.

•   There is flexibility in how the funds can be spent, unlike with a mortgage, which you must use to buy a house, or an auto loan, which must be used to purchase a car.

•   Proceeds from personal loans can be used for a variety of purposes, from paying down credit card debt to making home improvements and more.

•   Unsecured personal loans are offered by many lenders. There is no need to put any of your assets up as collateral for the loan, nor do you risk losing them should you default.

It’s important to weigh these benefits against potential disadvantages and determine whether it’s bad to get a personal loan for your financial needs. Here’s a look at some of the downsides of taking out a personal loan:

•   Personal loans may not offer the lowest-cost borrowing option. For example, you might be able to get a better rate on a home equity loan or a HELOC if you have enough equity in your home. That said, both of those lending instruments use your house as collateral, so if you default, you could risk losing your home.

•   Personal loans sometimes have fees or penalties that can increase the cost of borrowing. For example, origination fees on personal loans tend to be between 1% and 10%. Some lenders may charge prepayment penalties to ensure they don’t lose future interest payments if you repay your loan early.

•   When you take out a personal loan, you’re increasing your overall debt. If you have other debts, comfortably affording all your monthly payments can become a challenge. And missing payments or making late payments can have a negative impact on your credit score.

Recommended: What Is Considered a Bad Credit Score?

Pros and Cons of Personal Loans

Here’s a look at the pros and cons of personal loans at a glance.

When Can It Be a Good Idea to Get a Personal Loan?

So when is a personal loan a good idea?

Debt Consolidation

One reason to take out a personal loan is to use it as a credit debt consolidation loan to pay down high-interest credit card debt. The average credit card interest rate as of April 2026 is 19.16%. The current average personal loan interest rate as of May 2026, on the other hand, is 12.27%. If you have excellent credit, you may pay less, and if you have poor credit, you could pay more.

Consolidating high-interest credit card debt with a lower-interest-rate personal loan may make your monthly payments more manageable and potentially save you money in interest payments over the life of the loan.

If you use a personal loan to pay off credit card debt, it’s a good idea not to use those credit cards to incur even more debt.

Home Improvement

Using a personal loan to make improvements to your home may also be beneficial, as home improvements can increase the value of your home, possibly offsetting the cost of borrowing.

When Can It Be a Bad Idea to Get a Personal Loan?

There are a number of cases where you may wonder if getting a loan is bad. Here’s a look at some situations where getting a personal loan may not be a good idea.

No Credit Check Loans

Most loans — including most personal loans — require a credit check. This helps your lender understand your creditworthiness, or how likely you are to repay your debts. Generally speaking, the healthier your credit, the more favorable your loan interest rates and terms. Those with poor or limited credit may find it difficult to qualify for a loan.

No-credit-check personal loans, on the other hand, look at your bank account balance or require you to pledge some asset as collateral to secure the loan.

The problem is that these loans also tend to be extremely expensive — interest rates can well exceed 100%, which is generally considered to be predatory. There’s a pretty good chance that borrowers who rely on no-credit-check loans won’t be able to pay their bills on time, which could trap them in a cycle of debt.

Recommended: How to Avoid Falling Victim to Predatory Loans