At a Glance

If you need to pay for large or unexpected expenses, a personal loan can be a good option. You can use personal loan funds for just about any reason, and then you’d pay it back (plus interest) over time.

When it comes to applying for a personal loan, there are a number of factors to consider. With some research and preparation, the process of applying for a personal loan can be easier and you’ll be more likely to get approved.

In this article, learn more about:

Where can I apply for a personal loan?

Borrowers can get a personal loan through a traditional bank, credit union, online lender, or peer-to-peer lender.

  • Banks and credit unions likely allow borrowers to apply for personal loans in person at one of their physical locations, or via an online application. Your application process may be sped up if you’re already a customer or member of the bank or credit union.
  • Online and peer-to-peer lenders have an online-only application process, though likely have a customer service phone number that can be called for assistance if necessary. In most cases, it’s faster and easier to apply for a loan online than in person.
  • Non-banking financial institutions, also called non-banking financial companies, are sources without a banking license meaning they cannot accept deposits. They can be found online or in brick-and-mortar locations and include finance companies, insurance companies, payday lenders, and other non-bank entities. Most of the time they have higher interest rates, but you may be more likely to get approved even if you’re considered high risk.

Read more: Best Places to Get a Personal Loan

Information to have before applying for a loan

In order to make the loan application process go as smoothly as possible, you should prepare information and documentation ahead of time that will be needed for the application. Examples of this include:

  • Bank account information such as your routing number and account number.
  • Cosigner information (if your credit score requires one or you prefer to have one)
  • Information about the loan, including the loan amount, purpose of the loan, desired term, etc.
  • Personal information like your name, address, phone number, Social Security number, date of birth, etc.
  • Proof of employment and income.

If the purpose of the loan is for debt consolidation, be prepared with those account numbers, balances, and lender information as well.

Apply for a personal loan in 8 steps

If you have decided on getting a personal loan, there are several factors that go into finding the right loan for you, applying for one, getting approved and accepting the loan. With some research and preparation, you’ll be more likely to find the best loan and get the funds as quickly and efficiently as possible.

Here are the steps to getting a personal loan:

1. Estimate your need and repayment

The first step to getting a personal loan is to calculate how much you’ll need to borrow. This can be easy, or it can be more difficult, depending on what you’re using the loan for.

For example, if you’re taking out a personal loan to consolidate credit card debt and you know you have $10,000 in debt, you’ll need to borrow a $10,000 loan.

On the other hand, if you’re using the loan for home renovations or to pay for a wedding, you may have to get some estimates or get further along in the design or planning to have an idea of how much you’ll need.

The important thing is to only borrow what you can afford – get prequalified for the loan or use a personal loan calculator to estimate your monthly payment using estimated interest rates and repayment terms. Keep in mind that the longer the term, the shorter the monthly payments but the more you’ll pay in interest over time. The shorter the term, the higher the payments but you’ll save money in interest.

2. Check your credit score

When you apply for a loan, the lender will run a credit check to look at your credit score and credit history. The lender uses this information to determine how likely you are to repay the loan, and whether they are taking a risk by approving your application. Your credit score also helps determine your interest rate and loan terms.

If you have good and excellent credit – 670 or above – you will likely get the most competitive interest rate and best loan terms. If your score is lower than that, your application may still be approved, but you’ll likely have higher interest rates.

There are a few places you can check your credit score for free, so the first step is to do this and get a free copy of your credit report for the last 12 months. Check to see if there are any errors on the report that need corrected.

If your score is low, you may want to improve it before applying for a loan to increase your chances of approval and competitive interest rates. Look at lender credit score qualifications to see if you’d qualify, or the score you’d need to get the best rate.

Credit Score Average APR
720 – 850 10.3% – 12.5%
690 – 719 13.5% – 15.5%
630 – 689 17.8% – 19.9%
300-629 28.5% – 32%+

3. Consider your options

There are different types of loans, and depending on your credit score, a few options you may need to pursue.

  • For example, if you have a poor credit score, you may need a cosigner to get approved for the loan. In this case, you’ll need to find someone who will co-sign the loan, and a lender who will allow this.
  • Another example is a secured vs. unsecured loan. Secured loans may be easier to get if you don’t have great credit, but they require collateral for approval, and you risk losing that asset if you don’t repay the loan.
  • Also consider where to get your personal loan from, such as a bank or online lender. Online lenders typically work with borrowers who have lower credit scores compared to other options, but banks and credit unions may offer more favorable terms if you’re already a customer or member.

4. Choose your loan type

Personal loans can be used for just about anything, including:

However, you may find that some lenders offer personal loans specific to borrower needs. The total amount of the loan could vary, as well as other benefits or restrictions depending on what the loan will be used for. Some lenders specialize in certain types of personal loans.

It may be helpful to shop for loans specific to your needs. For example, if you are using a personal loan to consolidate debt, search for a debt consolidation loan.

5. Shop around for the best personal loan rates

Once you know your credit score and what type of loan you’re looking for, it’s time to start researching lenders to find the best rates. While your rate can depend on a few factors, here are some tips to get started:

  • When possible, get prequalified for the loan. This triggers a soft credit check, which doesn’t affect your credit score, and can give you an estimate of your interest rate and monthly payments with that lender.
  • If you are a customer with a bank or credit union, you may qualify for a better rate because you have a history with that financial institution, and they may be able to use that to support your application.
  • Compare average APRs from lenders, which you can typically find on their website. Remember, the better your credit score, the more likely you’ll qualify for a better rate.

The important thing to note is to not fill out and submit an application until you’re ready. Each application triggers a hard credit inquiry which can negatively affect your credit score.

Check out lenders and solutions that will meet your needs

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4.49% - 20.49%

Est. APR Range

$5,000 - $100,000

Loan Amount

2-20 years

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6.99% - 22.28%

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2-7 years

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5.99% - 24.99%

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$5,000 - $40,000

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2-5 years

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Good For: Eliminating high-interest credit card debt

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5.94% - 35.97%

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$1,000 - $50,000

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2-7 years

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5.99% - 35.99%

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$2,000 - $50,000

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3-5 years

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Good For: Low min. APR for bad credit score

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9.95% - 35.99%

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$2,000 - $35,000

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2-5 years

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2-5 years

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18% - 35.99%

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$1,500 - $20,000

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2, 3, 4, 5 years

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6. Consider ways to increase your chances of approval

If you want your loan application to be approved, there is some research and preparation you should do ahead of time. If you have excellent credit, a solid income, and a low debt-to-income ratio (DTI), you may not have to worry about getting approved. However, if your credit score is poor, or you don’t meet other requirements or qualifications, you can improve your chances of getting approved by:

  • Improving your credit score. Check your credit report for any errors and get them corrected. Also be sure to make any debt payments on time each month, and work to pay off debt to lower your credit utilization ratio.
  • Increase your income. Pick up extra hours or shifts at work, or even start a second part-time job. You can also start a side hustle to generate additional income. The greater your income, the less risky you’ll seem to lenders because you’re more likely to be able to repay the loan.
  • Explore secured loans. Secured loans are backed by collateral, which are assets such as your car, house, savings account, or something else of value. This makes you less risky because the lender will seize the collateral if you default on the loan.
  • Get a cosigner. Ask a trusted friend or family member if they will cosign on your loan. This can help increase your chances of approval if the cosigner has excellent credit and a solid income.

7. Fill out the application

Once you’ve chosen a lender, it’s time to fill out and submit the loan application.

Each lender and application can vary slightly and may require different information. However, in general, you’ll need to provide:

  • Your name
  • Address
  • Contact information
  • Income
  • Employment information
  • Loan information, such as requested amount and desired term

You may also have to provide certain documentation as proof of your address, income, or employment.

Before submitting the application, you’ll have the opportunity to review the loan’s terms and conditions, including fees, penalties, repayment period, and others. Read through this agreement carefully to ensure you understand all the details of the loan.

When you’re ready, submit the application.

8. Accept the loan and start making payments

Once you’re approved for the loan, you’ll be notified by the lender. This could happen in as little as 24 hours, or within 5-7 business days (on average). The next step is to review the final loan documents and accept the loan terms.

Once you accept the term, you’ll receive the funds. Again, this can happen within the same day, or within a few business days depending on the lender. The funds will get direct deposited into your account, or you may be able to request a paper check.

Then, it’s time to start making payments. You’ll likely be required to start making monthly payments right away, and it’s important to make these payments on time each month.

How to fill out a personal loan application

The lender you choose will tell you exactly what information and documentation you need in order to submit the application.

  • Start by going to the lender’s website and finding the loan application.
  • Most forms start with asking basic information such as your name, date of birth, address, and contact information. Then, you’ll be asked to provide financial information like your bank account numbers, income, assets, information about other debt, etc. They may also ask for employment information such as employment status.
  • Next, enter the loan information. This includes how much you want to borrow, how long you’ll need to pay it back, whether you want to enroll in automatic withdrawal, etc. Throughout this process, you may be asked to submit documentation providing proof of your answers.
  • Then, once it’s all filled out, verify all of the information is accurate and click submit.

Documents needed for a personal loan application

Some documentation you may need to provide includes (but is not limited to):

  • Education history, such as the degree you’ve earned and date of graduation
  • Financial information such as retirement account statements, outstanding debt balances, investment assets, etc.
  • Proof of address
  • Proof of employment
  • Proof of identity, such as a driver’s license, passport, recent utility bill or bank statement
  • Proof of income and income details, such as bank statements, pay stubs, W-2 forms, or proof of additional income like alimony, retirement, or child support
  • Social Security Number

Personal loan details to consider

When reviewing personal loan terms and loan agreements, there are a few factors to pay particular attention to. This can help you understand whether a loan is right for you, but also help you avoid any fees or penalties.

1. Loan details

Your expected loan amount, APR, monthly payment, and loan term can all be estimated when you get prequalified for a loan:

  • Expected loan amount is the actual amount of funds you’ll be approved for. This should be just enough to cover your needs, but not more as to avoid accruing interest on a higher amount.
  • APR, or annual percentage rate, is the interest charged for borrowing the funds, including fees. The balance of the loan will accrue interest at this rate.
  • Monthly payment is how much you’ll have to pay back each month.
  • Term is how long you have to pay back the loan. Typically, terms range from 12 to 72 months. In most cases, the longer the term, the lower the monthly payments, but the higher the interest costs in the long-term.

2. Fees and penalties

There are a few fees and penalties that you may incur with personal loans, so it’s important to be aware of them and know how to avoid them if possible. For example:

  • Application fees
  • Origination fees
  • Prepayment penalties
  • Late payment fees

Fees and penalties can be a flat dollar amount, or a percentage of the loan amount. Or, it can be one or the other depending on which is higher.

3. Types of interest

Interest rates for personal loans can either be fixed or variable. Fixed rates mean they do not change over time, so your monthly payment will remain the same. These are easier to budget for and calculate how much you’ll owe in interest over time. Variable rates can change over time, so your monthly payment can vary, and you could end up owing more in interest.

Interest is also calculated in a few different ways:

  • Simple interest method is the most common, and is when the interest rate is only applied to the loan’s principal amount. If you make late payments, the amount of your payment applied to interest increases, and less is applied to the principal.
  • Compound interest method only applies to making early or extra payments. If you make payments on time, the results are the same as the simple method because interest doesn’t accumulate. But if you are late, accumulated interest is added to your principal, so future interest is actually “interest on interest.” Examples include credit cards, student loans, and mortgages.
  • The add-on interest method is when interest is calculated up front, added to the principal, and the total is divided by the number of payments you’ll make. This often happens with payday loans, short-term advance loans, or loans approved for borrowers with poor credit.

4. Automatic withdrawal

Some lenders allow you to set up automatic withdrawal, which means the monthly payment is automatically removed from your checking or savings account and put toward the loan. It’s a common feature but finding a lender who allows this can help ensure you don’t miss a monthly payment.

5. Secured or Unsecured

Personal loans are typically unsecured, but if you have poor or no credit, you may have better luck getting approved for a secured loan.

  • Unsecured loans are loans that don’t require any type of collateral. Instead of relying on this collateral, the lender approves these loans based on the borrower’s creditworthiness.
  • Secured loans do require collateral, such as a vehicle, house, or savings/investments in order to get approved. These assets are used as payment to the lender if you fail to repay the loan, which means you lose them. Secured loans are riskier if you aren’t sure if you’ll be able to repay the loan but can help borrowers with poor credit get approved.

Read more: Secured vs. Unsecured Personal Loans: What You Need to Know

FAQs

The easiest and fastest way to apply for a loan is online. You can find applications on the lender’s website, and with just a few button clicks, you can submit the application. For the process to be most efficient, be prepared ahead of time with the information and documentation you may need to provide.

Regardless of how big or small of a personal loan you need, the application process is the same. You can either apply in person with a bank or credit union, or online. Typically, the online process is faster and easier. Personal loan amounts often range from $1,000 to $100,000, but loans can be as small as $500 depending on the lender.

Even if you have poor credit, you have options for getting a personal loan. Start by researching online lenders, as they are more likely to work with borrowers with bad credit. You may have to consider a secured loan, which means you provide collateral to back the funds, or get a cosigner on the loan. If you can, get prequalified for the loan first to get an estimate of approval and interest rate.

The length of time it takes for your personal loan to be funded depends on factors such as the lender, how quickly your application is approved, and how fast you accept the loan and sign all appropriate documents. Once you are approved, most lenders will fund the loan within five to seven business days, though some online lenders may have same-day or next-day funding.

When you submit a loan application, it triggers a hard credit inquiry on your credit report. This will decrease your score by a few points for a short period of time and remain on your report for two years.

Read more: Credit Score Required For a Personal Loan

You may be disqualified from getting a personal loan if:

  • Your credit score isn’t high enough.
  • You don’t have a great credit history.
  • You have too much outstanding debt, making your debt-to-income ratio too high.
  • You don’t meet minimum income requirements.
  • You’re asking for too high of a loan amount.