Personal loans are not treated as taxable income, so you don’t owe federal income tax on the amount borrowed. Unlike mortgages, the interest you pay on a personal loan is generally not tax-deductible. However, if part of the loan is forgiven through bankruptcy or debt settlement, the unpaid amount may be classified as taxable income.

Yes, personal loans can impact your credit score. When you apply, lenders perform a hard inquiry, which can temporarily lower your score slightly. Beyond that, your repayment behavior plays a big role: making consistent, on-time payments can boost your score, while missed or late payments can damage it.

Like any form of borrowing, personal loans carry risks. The main risk is being unable to keep up with the required monthly payments. Falling behind can hurt your credit score, result in debt collection efforts, and in severe cases, even lead to bankruptcy. Borrowers should only take loans they can realistically repay.

Not exactly. While both provide unsecured credit, they work differently. A personal loan is typically a lump sum borrowed at a fixed interest rate with a set repayment schedule. A credit card, by contrast, is a revolving line of credit that lets you borrow and repay repeatedly, with interest charged only on unpaid balances.

Interest rates on personal loans vary depending on factors like your credit score, income, loan amount, and lender policies. Most personal loans come with fixed interest rates, offering predictable payments. However, some lenders offer variable rates tied to market benchmarks, which may rise in higher-rate environments.