Is a personal loan the right solution for you?

Personal loans have surged in popularity, due in part to increasing consumer confidence and a growing array of online lenders to provide them.

Credit reporting agency Experian says that personal loans were the fastest-growing type of consumer debt in the past year. According to Experian, existing personal loan debt hit $273 million in the second quarter, up 11 percent from the same quarter last year. While personal loans remain a small part of overall consumer debt, that’s a faster increase than seen for auto, credit cards, mortgages and student loan borrowing.

The basics

A personal loan can be used for any purpose, although they are often used to consolidate debt or make a major one-time purchase. The money is provided in a lump sum and repaid over a fixed period of time — typically a few years — with equal monthly payments.

Consumers like personal loans because they provide an easy solution when they need a large sum of cash, such as to pay for braces or a new roof. And for those people trying to dig out from under credit card or other revolving debt, the loan establishes an easy means to budget with lower interest rates than credit cards, and with a finish line for repayment they can look forward to.

The exact interest rate someone pays depends on several factors, including credit score, credit history, monthly cash flow and debt-to-income ratio. The stronger your credit profile and history of financial responsibility, the lower the interest rate you can expect.

The need

Consumers are using per-

ELISE AMENDOLA — THE ASSOCIATED PRESS FILE PHOTO In this June 15 photo, $20 bills are counted in North Andover, Mass. Personal loans are enjoying a surge in popularity, due in part to increasing consumer confidence and a growing array of online lenders to provide them. Credit reporting agency Experian said last month that personal loans were the fastest-growing type of consumer debt in the past year.