a woman reading personal loan terms at her desk

If you take out a personal loan, your lender will give you a document listing its terms and conditions. You will want to keep this document for future reference because it contains important information on the details of the loan. If you have a question, there’s a good chance the terms and conditions contain the answer you are looking for. 

What is a Personal Loan?

Personal loans are highly flexible loans issued by banks, credit unions, and other lenders that can be used for many different purposes. The amount that you can borrow with a personal loan varies depending on the lender with the maximum being between $25,000 and $100,000. Just a few things these loans can be used for include:

  • Home improvements
  • Medical expenses
  • Consolidating debt
  • Buying a vehicle
  • Education expenses
  • Business expenses
  • Funding a vacation
  • Vehicle repair 

The payment terms on personal loans are usually either short or mid-term. Factors that affect how much you can borrow and your interest rate include your credit score, credit history, and your income. 

Personal loans are usually unsecured. This means they are not backed by any collateral. Because of this, these loans usually have higher interest rates than loans backed by collateral (secured loans). 

Read More: What is a Personal Loan?

Common Personal Loan Terms and Conditions

The following are some common items you may see on personal loan terms and conditions. Additional sections may be included based on the specifics of your loan or the lender. 

Details of the loan

This section outlines the details of the loan and will include the following information:

  • Amount borrowed
  • Account number
  • Number of monthly payments
  • Amount of interest charged
  • Total repayment amount
  • The purpose of the loan
  • Other details specific to your loan 

Receiving the loan 

Whether you will receive the loan as a direct deposit into your checking or savings account or by another method is covered in this section. The date you will receive the loan will also be stated. Personal loans are typically processed within 1-5 days, although they may take longer in some cases.


This section covers information pertaining to the monthly payments on your personal loan. It includes the due date for your first payment, the specific amount you will be paying each month, the date of the final payment, and other relevant information.   


The amount you will pay in interest on your loan is covered in this section. It includes information on both the interest rate and the annual percentage rate (APR).

Interest is the money you pay the lender for the use of the money you borrow. The interest rate is the amount of interest you will pay annually. It is typically expressed as an annual percentage of the principal. For example, a loan may have an interest rate of 5%.

The annual percentage rate, or APR, includes the interest rate, but it also includes lender fees and other charges. The APR gives borrowers a more complete picture of how much they will pay the lender for the use of borrowed money. 


Some people like to make extra payments on their loans to pay them off more quickly. This section discusses whether extra payments or early repayment is allowed for the loan. If early repayment is permitted, an explanation of how you can find out your outstanding balance will be provided. 

This section will also include information on prepayment penalties (if applicable). If a loan has prepayment penalties, details of the penalty will be helpful in deciding whether to pay off the loan early or to continue with the monthly payments.

Late payments

If payments are missed, this section goes over the repercussions. It discusses how the late payments will impact your credit score and how it may make it harder for you to obtain loans in the future. The financial impact of the late payments (paying more in interest) will also be mentioned. 

This section also typically includes a warning about how late payments could result in the loan agreement being canceled. A discussion of what happens if you fail to repay your loan – such as legal proceedings – is also included.

Loan cancellation

Situations that would result in the cancellation of the loan – like paying off the loan or failure to repay the loan are discussed in this section. It also mentions circumstances when the lender would end the loan agreement and demand early payment. Examples include failure to make timely monthly payments, legal or regulatory changes, or a recent bankruptcy that may indicate difficulty in repaying the loan.

Additional services

This section discusses any additional services that your lender may offer for your personal loan including balance transfer programs or optional credit insurance. For an extra fee, a credit insurance policy will pay off a loan in the event of death or disability. 

Your right to withdraw

There are some circumstances where people take out personal loans and then change their minds. Some loans allow for a short window after the loan has been initiated to withdraw. If a loan agreement allows for early withdrawal, this section will discuss how long you have to withdraw and the process for initiating the withdrawal. 

Applying for a Personal Loan

If you are considering a personal loan, be sure to check out the rates offered by Bowater Employees Credit Union. Our helpful online loan calculator can help you determine your approximate loan payments. We have a guide on how to get approved for a personal loan. One of our loan specialists will also be glad to assist you with any questions you may have.