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How to get a loan in 8 steps

Knowing about the process before you apply can help you get financing.

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Taking out a loan can help you buy a new vehicle, pay for home renovations, get married and even consolidate debt – but what really goes into getting a loan?

Step 1: Decide how much you can borrow

Finding the right loan starts with knowing how much you need and being aware of your current financial circumstances. To determine the right loan amount, it’s crucial to stay within your means and ensure you can meet monthly repayments in full and on time. You also need to think about how long you’ll need to repay it and what kind of payments you can afford. Any additional features you’d like from your loan, such as the ability to pay it off early without incurring a penalty, should also be noted.

Step 2: Find the right loan type

There are different types of loans available for different financial needs. Applying for a loan that directly matches what you plan to use it for will improve your chances of getting approved. The most common loan types are:

  • Personal loans. Can be used for any legitimate purpose.
  • Auto loans. Used for buying a car.
  • Student loans. Used to pay for school expenses such as tuition, housing and books.
  • Business loans. Used for launching or growing your business.
  • Short-term loans. For when you’re in a tight financial spot and need cash quick (these include installment, payday and auto title loans).
  • Mortgages. Used for buying your next home.

Here are some other factors you should look at when considering different loan types:

  • Secured vs unsecured. Secured loans require you to put up collateral, while unsecured loans don’t. If you take out a secured loan and aren’t able to make repayments, your lender can repossess anything you use as collateral and resell it to recoup any losses. Assets that can be put up as collateral include vehicles, your home and jewelry.
  • Fixed vs. variable rate. Loans that are fixed-rate will have the same interest rate throughout the entire term, while variable rate loans can have their interest rate change during the term. The main benefit to getting a fixed-rate loan is that you can expect your monthly repayments to always be the same, while a variable rate loan typically has lower interest at the beginning of repayments (but can increase later on).

You may also want to compare the maximum loan amounts offered by lenders to be sure you can get all the funding you need.

Step 3: Check your credit score

Checking your credit score is important to figure out what loan amounts and interest rates you may be able to qualify for. Say you’re looking to purchase a car. If you have a good credit rating, a secured personal loan might give you a lower annual percentage rate (APR). However, if you have bad credit, you may need to consider getting a cosigner in order to qualify. You also may not get as competitive of an APR.

You can view your credit score and history for free through each of the two major credit bureaus (TransUnion and Equifax). You can also check your credit score for free online with a reputable credit company.
Get your credit score here

Step 4: See what lenders are offering

Different lenders have varying loan types on offer. For instance, a bank will offer a range of personal loan and credit card products, but is less likely to have solutions for you if your credit score is low – beyond possibly being able to offer you a higher APR. Other lenders may only have products for bad credit borrowers, such as payday and installment loans.

Step 5: Find out about eligibility requirements and APR

This is one of the most important steps to take before applying. Lenders list basic eligibility criteria that needs to be met before you can apply for the loan – so be sure you meet those terms before you apply or else you’ll temporarily damage your credit score, and waste your time. Lenders may also list an APR range that they offer online. This can give you a good idea of what you’ll be looking to pay in interest and fees.

Bad credit loans, such as payday loans, come with a standard cost that is offered to all borrowers. Some lenders, such as peer-to-peer lenders, let you get a rate estimate without it affecting your credit score. It’s important to know what your credit score is and have a fair idea of what APR you may be eligible for before you apply.

Step 6: Compare your options

The way to find the best loan for you is to decide what you want and then to compare all of your options to make sure you’re getting a competitive deal. How much is the lender charging in fees? How does this compare to other similar loans? It can also help to compare the additional features offered by lenders. Remember to keep in mind the eligibility criteria of loans and the APR you may be offered.

Step 7: Gather what you need to apply

The information you need to apply will depend on the lender and the type of loan you’re applying for. For most loans, you’ll need documents to confirm your identity, prove your address, verify your income and other financials, and you’ll also need information regarding your employment. If you’re applying for a secured loan, you will need additional documentation regarding the collateral that you plan to provide.

Some documentation that you might be required to have on hand when applying for a loan include:

  • Driver’s license or valid ID
  • Bank statements
  • Recent tax documents
  • Proof of employment

List of documents required to get a loan

Step 8: Fill out and submit an application

Once you’ve settled on the right loan, it’s time to apply. The majority of lenders offer a convenient online application, but you may also be able to apply in-person at a branch or over the phone. You usually won’t have to fax over any documents if you apply online, but you should check this before you apply. Turnaround time for approval and receiving your funds differs – timeframes fluctuate from a few hours to a few weeks.

7 tips to increase your chances of getting approved for a personal loan

Compare personal loan providers

Name Product Interest Rate Max. Loan Amount Loan Term Fees Min. Credit Score Link
Mogo Personal Loan
9.90% - 47.42%
$35,000
9 months - 5 years
NSF fee - $20 - $50
540
Go to site
More Info
Mogo offers loans up to $35,000 on flexible terms.
Loans Canada Personal Loan
Secured from 2.00%, Unsecured from 8.00% to 46.96%
$50,000
3-60 months
No application or origination fees
300
Go to site
More Info
Loans Canada connects borrowers to lenders offering both secured and unsecured personal loans in amounts from $300 to $50,000. Submit one application to get rates from multiple lenders across Canada.
LoanConnect Personal Loan
10.00%-46.96%
$50,000
6-60 months
No application or origination fees
N/A
Go to site
More Info
LoanConnect is an online broker that matches borrowers to lenders offering loans in amounts from $500 to $50,000. Get approved for multiple loan offers from different lenders in as little as 60 seconds with any credit score.
Fairstone Personal Loan (Unsecured)
26.99% - 39.99%
$20,000
6 months - 5 years
None
560
Go to site
More Info
Fairstone offers unsecured personal loans up to $20,000
Cash Money Installment Loan
46.93%
$10,000
6 months - 5 years
Vary across provinces/territories
560
Go to site
More Info
Cash Money offers installment loans up to $10,000 for AB, MB and NB residents.
LendDirect Personal Loan
19.99% - 46.93%
$15,000
No end dates
None
560
Go to site
More Info
Borrow up to $15,000, based on your income and credit history, with a personal line of credit from LendDirect.
LendingMate Personal Loan
43% (British Columbia and Ontario) and 34.90% (Quebec)
$10,000
1-5 years
None
700
Go to site
More Info
LendingMate offers loans to Canadians with poor credit with no credit checks. Guarantor required for application.
Fairstone Personal Loan (Secured)
19.99% - 23.99%
$35,000
3-10 years
Varies by province
560
Go to site
More Info
Fairstone offers secured personal loans up to $35,000.
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Compare up to 4 providers

Bottom Line

Personal loans can be a viable option to consider when you’re in need of funds. Understanding the ins and outs of the process can help you confidently decide on the right loan to apply for, help you gather the right documents and ensure your application process is smooth and simple.

Frequently asked questions about getting a loan

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