Many people who default or are at risk of default may not know about personal loan credit insurance. If you lose your job or experience a disability and are unable to pay your loan back, credit insurance can pay the lender directly and help ensure you won’t default.
When you borrow a personal loan, your lender may offer the option of purchasing credit insurance along with it. Credit insurance policies have certain restrictions, however, and can add to your cost of borrowing, so they may not be necessary.
What is personal loan credit insurance?
Personal loan credit insurance helps cover payments on your personal loan if you’re unable to do so. A credit insurance policy might kick in if you lose your job or become disabled. It may also apply if you pass away.
There are four main types of personal loan credit insurance:
- Credit involuntary unemployment insurance: Also known as involuntary loss of income insurance, this type of policy can make loan payments if you’re laid off or otherwise lose your job for reasons out of your control.
- Credit disability insurance: This type of insurance can make loan payments if you can’t work due to illness or injury. It’s also known as accident and health insurance.
- Credit life insurance: This is a type of policy that can pay off the loan’s balance if the borrower passes away.
- Credit property insurance: This type of credit insurance helps protect any collateral that you used to secure the loan, which could apply if you borrowed a secured personal loan, rather than an unsecured one.
Important
If you already have satisfactory coverage from some type of health, life, or property insurance policy, you may not need to get credit insurance.
How does personal loan credit insurance work?
You can usually purchase credit insurance when you take out a personal loan. The rules of each policy may vary, so make sure to read the fine print about what your policy covers and any restrictions that apply.
For example, some policies may not approve claims based on preexisting conditions. Plus, some policies only cover payments for a certain amount of time or up to a certain age of the borrower, rather than making payments for the remainder of your loan.
If you file an eligible claim, your credit insurance issuer will likely send payments directly to your lender. If your insurance is covering payments, you won’t have to worry about your loan becoming delinquent or damage to your credit.
The cost of personal loan credit insurance
The cost of personal loan credit insurance can vary widely depending on the policy you choose, the coverage you want, and the state where you live. Before purchasing personal loan credit insurance, it’s worth comparing alternative options, such as disability insurance or life insurance. You might find more affordable options for these plans, especially if your employer offers them as benefits.
You may also be able to reduce the cost of personal loan credit insurance if you can pay for the entire premium upfront. If you roll the amount into your monthly loan payments, you’ll pay interest on this higher balance, resulting in a higher overall cost of borrowing.
Keep in mind
While credit insurance can cover you in case of a life-altering event, it’s often not worth the cost. The premium is often included in the total loan amount, meaning you’ll pay interest on it over the life of the loan.
Pros and cons of personal loan credit insurance
While credit insurance can protect you if the unexpected happens, there are some considerations to keep in mind before getting coverage.
Pros
- Can protect you if you can’t pay back your loan: Personal loan credit insurance can cover your loan payments if you lose your job or experience a disability. This protection can ease stress while you deal with these unexpected challenges.
- May prevent your credit from getting damaged: If your insurance covers payments, you won’t have to worry about defaulting on your personal loan and having your credit score damaged as a result.
- Coverage is optional: While a lender may offer credit insurance, it’s not required to borrow a personal loan. They also can’t pressure you into buying it along with taking out the loan. You can decide whether purchasing a plan makes sense for you.
Cons
- May be more expensive than other types of insurance: Personal loan credit insurance may be more costly than alternative insurance plans that can offer similar protections, such as disability or life insurance.
- Will increase your cost of borrowing: The cost of credit insurance is often rolled into the loan, increasing your monthly payments and interest charges.
- Restrictions may limit how useful the policy is: Your policy may only cover loan payments temporarily, for instance, or it may reject claims based on preexisting conditions.
Should I get personal loan credit insurance?
The delinquency rate on consumer loans was 3.75% in the third quarter of 2023, according to TransUnion data. Personal loan insurance may give you peace of mind about your loan payments, but it’s not necessary for every borrower. Again, if you already have life or disability coverage, you may be covered in the event of unexpected circumstances without the added expense.
It’s also worth considering your budget. Loan insurance can add to your borrowing costs, so consider whether the added expense is worth it. If the extra amount is unaffordable, you might alternatively funnel some money into an emergency fund to shore up your savings.
Check out the plan’s fine print, too. Pay attention to what the plan covers — and what it doesn’t — to ensure that it’s sufficiently useful to justify the cost. the Federal Trade Commission recommends asking the following questions:
- How much is the premium, and will it be financed as part of the loan?
- Is it possible to pay monthly instead of financing the entire premium with the loan?
- Will my monthly loan payment be lower without the credit insurance?
- Will the insurance cover the full loan amount and repayment term?
- Is there a waiting period before coverage kicks in?
- What coverage does a co-borrower have?
- What’s covered and what isn’t covered?
- Is it possible to cancel the insurance and get a refund?
By combing through the details of the plan, as well as comparing alternative options, you can determine whether personal loan credit insurance is right for you. And remember that this insurance is optional — a lender can’t deny your personal loan if you decide against purchasing a plan.
Advertiser DisclosureOverview
Lightstream is one of three Credible partner lenders to offer loan amounts up to $100,000, which makes it ideal for financing large expenses like home improvements or weddings. Funds are available as soon as the same day you apply, and you'll have up to 12 years to repay certain types of loans, including home improvement loans, RV loans, and boat loans. There are no origination fees, and rates are low — Lightstream's lowest APR beats SoFi's advertised lowest APR by 1 percentage point. But you'll need good credit to qualify.
Unlike most lenders, Lightstream does not let you prequalify on its site. Nor does it provide a contact phone number next to its customer service hours on its website.
Repayment terms
2 - 12 years, depending on loan purpose
Eligibility
Available in all states except RI and VT
Time to get funds
As soon as the next business day
Loan uses
Credit card refinancing, debt consolidation, home improvement, and other purposes
Read full reviewOverview
Upstart has one of the lowest available APRs of Credible partner lenders and of all non-partners we reviewed, making it a good choice for well-qualified applicants. However, it's also is one of few lenders that doesn't have a minimum credit score requirement (if you apply on the lender's website), which makes it an option if you have bad credit or no credit history. Upstart may charge an origination fee as high as 12%, but good-credit borrowers may not be charged one at all.
Trustpilot gives Upstart 4.9 stars, which is the highest of all lenders we reviewed.
Time to get funds
As soon as 1 to 3 business days
Loan uses
Pay off credit cards, consolidate debt, relocate, make a large purchase, and other purposes
Read full reviewOverview
Discover Personal Loans offers low APRs, repayment terms up to seven years, no origination fees, nationwide availability, and doesn't require your Social Security number to prequalify on its site. You'll need to have an annual income of at least $40,000, and a FICO score 660 or higher, to be eligible. If your credit score is fair or poor, you'll need to go elsewhere, as Discover doesn't allow cosigners.
Funds are available as soon as the next business day after loan approval.
Eligibility
Available in all 50 states
Time to get funds
Funds can be sent as soon as the next business day after acceptance
Loan uses
Auto repair, credit card refinancing, debt consolidation, home remodel or repair, major purchase, medical expenses, taxes, vacation, and wedding
Read full reviewOverview
PenFed is a credit union that offers personal loans to applicants with good credit. Though you'll need to become a member to receive a loan, membership is open to everyone. PenFed shines with no origination fees, small available loan amounts, and low interest rates. If you don't have a FICO score above 700, you may not qualify on your own, but can apply with a cosigner with good credit — which is not something most lenders offer.
PenFed doesn't have a minimum income amount, and offers live chat and an entirely online loan application process.
Fees
Unsuccessful payment fee, late fee
Time to get funds
Typically 1 to 2 business days after verification
Loan uses
Debt consolidation, home improvement, credit card refinancing
Read full reviewOverview
Upgrade has a suite of features that make it a very attractive lender: competitive interest rates, discounts for direct pay and autopay, as soon as same-day funding, up to seven-year repayment terms, and nationwide availability. Plus, loans are available to fair-credit borrowers, and you don't need to input your Social Security number to prequalify on the website. Upgrade even offers secured personal loans, which is not common among lenders.
However, Upgrade does charge an origination fee of 1.85% to 9.99%. You must have a FICO score of at least 600 and a minimum income of $25,000 annually to qualify.
Loan amount
$1,000 to $50,000 ($3,005 minimum in GA; $6,600 minimum in MA)
Loan uses
Credit card refinancing, debt consolidation, home improvement, major purchase, other
Read full reviewOverview
LendingClub is a solid lender for good credit borrowers and some fair credit borrowers that apply directly on its website. It's easy to prequalify with LendingClub, especially if you're uncomfortable providing your Social Security number, as the company doesn't require it at the prequalification stage. (You will need to provide it if you move forward with a full application.)
While prequalification is not a guarantee that you'll be approved for a loan, LendingClub does a better job than most other Credible partner lenders at approving applicants that have successfully prequalified. In other words, you're less likely to have your application declined once you apply (if you've already prequalified). LendingClub may charge an origination fee between 3% and 8%.
Eligibility
Available in all 50 states
Loan uses
Debt consolidation, paying off credit cards
Read full reviewOverview
SoFi stands out for offering no-fee personal loans with competitive rates, high loan amounts, long loan terms, discounts for autopay and direct pay, and funding as soon as the same day. Plus, SoFi prioritizes convenience for existing and potential customers with features like live chat and an easy prequalification process that doesn't require your Social Security number.
The main catch is that you need to qualify for a loan with SoFi, which can be hard to do if you don't have good credit. You also won't be able to apply with a cosigner, since SoFi doesn't accept cosigners; nor does it offer secured personal loans.
Fees
Option to pay an origination fee (up to 6%) in exchange for a lower rate
Time to get funds
Typically within a few days, given approval and bank account verification, but sometimes within the same day
Loan uses
Solely for personal, family, or household uses
Read full reviewOverview
Best Egg is a solid lender for a wide range of borrowers and, notably, scored second for personal loan satisfaction in J.D. Power's Consumer Lending Study. It offers competitive rates, reasonable loan terms and amounts, and personal loans for fair credit. You'll need a FICO score of at least 600 to qualify, but the lower your score, the higher your APR may be. The APR includes the interest rate and origination fees, which range from 0.99% to 8.99% with Best Egg.
Note that if you successfully prequalify with Best Egg, you may be more likely to be approved for the loan relative to other lenders you prequalify with. Based on Credible data, borrowers who chose to apply for a loan with Best Egg were more than twice as likely to be approved (relative to most other Credible partners).
Fees
Origination fee, late fee, unsuccessful payment fee, check processing fee
Eligibility
Available in all states except DC, IA, VT, and WV
Time to get funds
As soon as 1 to 3 business days after successful verification
Loan uses
Credit card refinancing, debt consolidation, home improvement, and other purposes
Read full reviewOverview
Avant personal loans are a good choice for borrowers with bad credit looking for small- to moderate-sized personal loans. Loans are available up to $35,000 and you could get the money as soon as the next business day after approval. Plus, Avant is more likely than some lenders to approve the applications of borrowers who've prequalified with Avant. However, the lender charges an origination fee up to 9.99%, and its top-range interest rates are among the highest of the lenders we reviewed.
Fees
Origination fee, late fee, dishonored payment fee
Eligibility
Available in all states except HI, IA, MA, ME, NY, VT, and WV
Time to get funds
As soon as the next business day (if approved by 4:30 p.m. CT on a weekday)
Loan uses
Debt consolidation, emergency expense, life event, home improvement, and other purposes
Repayment terms
1 to 5 years (2 to 5 years through Credible)
Read full reviewOverview
It’s worth considering a personal loan through Splash if you have good credit (ideally, a FICO score above 700). The platform offers loans from a wide range of lenders, and next-day funding is available. Plus, Splash has a live chat feature so you can get real-time answers without having to wait on hold or for an email. Loans are available up to $100,000 if you apply via Splash’s website.
Rates are competitive, but borrowers with excellent credit may find lower APRs elsewhere. If you need a repayment term longer than five years, you’ll need to look elsewhere as well.
Loan amount
$5,000 - $100,000 (up to $35,000 on Credible)
Eligibility
Available in all states except VT. OH and NM net disbursed amount must be greater than $5,000. MA must be greater than $6,000
Time to get funds
Same day available, typically 1-3 days
Loan uses
Debt consolidation, home improvement, medical expenses, major purchases
Read full reviewOverview
Universal Credit is one of a handful of lenders that offers personal loans for bad credit. If your FICO credit score is at least 560, you may be eligible for a Universal Credit personal loan. It offers loan amounts up to $50,000, repayment terms up to seven years, and discounts for direct pay and autopay. Funds are available as soon as the next business day after loan approval.
Note that rates and fees can be relatively high — you may pay an origination fee from 5.25% to 9.99%, and APRs start at 11.69%. If you get a loan with a high interest rate, consider refinancing your personal loan at a lower rate once you've improved your credit score.
Eligibility
A U.S. citizen or permanent resident; not available in DC, IA, SC, WV
Time to get funds
As soon as 1 business day after acceptance
Loan uses
Debt consolidation, pay off credit cards, home improvements, unexpected expenses, home and auto repairs, weddings, and other major purchases
Read full reviewOverview
Happy Money has been in operation since 2009 (formerly known as Payoff). It's an option for fair-credit borrowers (plus those with better credit), and notably has a relatively low top-end APR. In other words, you could qualify for a lower rate with Happy Money with fair credit, relative to other lenders that offer fair-credit loans. The company does charge an origination fee on some loans, up to 5%, but that's not as high as some other lenders' origination fees.
You should be prepared to wait a few days to get your money, as funding can take three to five days once approved. And loans aren't available in Massachusetts or Nevada. Happy Money has an A+ rating with the BBB and is ideal for debt consolidation and credit card consolidation loans.
Eligibility
Available in all states except MA, MS, NV, and OH
Time to get funds
As soon as 2 - 5 business days after verification
Loan uses
Debt consolidation and credit card consolidation only
Read full reviewOverview
BHG Money stands out for offering the largest loan amounts — up to $200,000 — of any Credible partner lenders. Simply put, if you need an unsecured personal loan over $100,000, there are very few places to look, but BHG is one. You'll have up to 10 years to repay the loan, but you'll need an annual income of at least $100,000 to qualify and a FICO score that's 660 or higher. However, if you have a cosigner that meets these requirements, BHG will consider your application.
Loan amounts start at $20,000, so look elsewhere for small loans. And BHG charges a modest origination fee between 2% and 4%, depending on your financial profile. Loan funds are available within three to 14 days of loan approval. Note that you can't prequalify with BHG.
Fees
Origination fees, late fees
Eligibility
Available in all states except Maryland and Illinois
Loan uses
Debt consolidation, baby (adoption), engagement ring financing, moving (relocation), business, home improvement, special occasion, cosmetic procedures, major purchase, taxes, credit card refinancing, medical expenses, vacation, wedding, other
Read full reviewFees
Origination Fee, $15 Late Fee, $25 NSF Fee
Eligibility
Available in all states except CO, CT, ME, NV, NH, TN, VT, WV, WY, and all U.S. Territories
Time to get funds
Funds typically deposited into your account in 1 business day13
Loan uses
Debt consolidation, credit card refinancing
Read full reviewOverview
OneMain Financial has multiple options for bad-credit personal loans. There is no minimum credit score required (if you apply directly with OneMain), which means you could get a loan with bad credit (FICO below 580). Plus, cosigners are allowed — a cosigner is someone (ideally, with good credit) who promises to repay the loan if you can't, which can make it easier to qualify or lower your rate. And, secured personal loans are available. You secure a loan with collateral, which may also help you qualify or lower your rate.
Rates are higher than competitors and OneMain charges origination fees as either a flat fee up to $500, or a percentage from 1% to 10% (depending on your state of residence). Note that even if you prequalify for a personal loan with OneMain, getting approved isn't a given.
Fees
Origination fee, unsuccessful payment fee, late fee
Eligibility
Must have photo I.D. issued by U.S. federal, state or local government
Time to get funds
As soon as 1 to 2 days after acceptance
Loan use
All except business, and education
Read full reviewCredit insurance FAQ
What are the different types of credit insurance?
There are four main types of credit insurance: involuntary unemployment, disability, life, and property. Credit involuntary unemployment and credit disability insurance may cover payments if you lose your job or experience a disability, respectively. Credit life insurance can pay off the loan balance should you pass away, while credit property insurance can help cover the asset you pledged as collateral on a secured loan.
When should I get personal loan credit insurance?
Personal loan credit insurance could make sense if you want to be protected in the case of job loss, disability, death, or damage to your collateral and don’t have alternative insurance plans already in place that offer this sort of coverage. However, it may not be necessary if you’re confident about your ability to pay back the loan or can’t afford the additional costs of loan insurance.
Can a lender require credit insurance?
A lender cannot require you to purchase credit insurance. If you encounter a lender that’s demanding credit insurance, consider filing a complaint with the Consumer Financial Protection Bureau, the Federal Trade Commission, or your state’s attorney general or state consumer protection office.
Compare Rates Now
Meet the expert:
Rebecca Safier
Rebecca Safier has over eight years of experience writing on personal finance and higher education. Formerly a senior writer for LendingTree and Student Loan Hero, she’s covered student loans, financial aid, personal loans, budgeting, and more. She loves helping people make informed financial decisions. When she’s not writing, you can find her blogging on her personal site Remote Bliss.