How to apply for a personal loan

How to apply for a personal loan (with pictures)

We value our editorial independence, basing our comparison results, content and reviews on objective analysis without bias. But we may receive compensation when you click links on our site. Learn more about how we make money from our partners.

A step-by-step guide to the application process.

A personal loan is a handy tool to cover any large expense. Before you apply, learn what you’ll need to complete an application and increase your chances of approval.

8 steps to take before getting started

Before you start on the loan process, confirm what type of loan you need. Personal loans are generally unsecured, meaning they use your credit as a gauge rather than an asset like your house or car. If you need a larger loan or need an open source of credit, you may want to consider other financing options.

1. Decide how much money you need

The amount you borrow should be based on the expense you’re trying to cover and your income. It’s better to determine how much you can spend each month and borrow less than your maximum so you can avoid stretching yourself too thin.

Taking out a loan that’s too small can leave you with remaining financial needs, but if you take out a loan that’s too large, you’ll be stuck paying interest on a larger amount than necessary. This is why you should carefully calculate the debt you can handle and the amount of your purchase before you apply.

2. Find the right type of loan

There are a wide range of personal loan types that are appropriate for different borrowers. Common types of personal loans include:

  • Unsecured personal loans. A loan without collateral for general personal use. This is the most common type of personal loan.
  • Secured personal loans. A loan backed by collateral for general personal use.
  • Debt consolidation loans. A loan you can use to pay off current debts for a better rate and easier repayments.
  • Medical loans. Some lenders offer special financing options for borrowers undergoing medical or dental procedures.

While these are the most common, personal loans are generally available for almost any purpose. Check with your lender to see if it has any restrictions on how you use your funds.

3. Decide on the right type of lender

Banks and credit unions tend to offer a more hands-on experience. Current customers might also get discounted rates. But they typically take much longer to process your application than online lenders. They also require more documents and the application itself can be more complicated.

Consider what you value the most when deciding where to start your search: assistance or speed.

4. Check your credit score

Your credit will determine how much you qualify to borrow. The better your score, the better your chance to be approved for the loan amount you want at a competitive rate.

While systems vary, FICO breaks down credit scores into four categories:

  • Excellent credit: 740+
  • Good credit: 670 to 739
  • Fair credit: 580 to 699
  • Poor credit: Less than 579

Most lenders will require good credit and at least one year of credit before they offer you an unsecured loan, so check your credit score with before you apply for a personal loan.

5. Check the lender’s requirements

Don’t waste time applying for a loan that you’re ineligible for. Before you consider a lender, check their eligibility requirements. Typical requirements include:

  • Credit Rating: Varies, but the lowest average score is 640
  • Annual Income: Typically $25,000 or more
  • Credit History: You will usually need a credit history of at least three years to qualify
  • Debt-to-income ratio: Most lenders prefer a debt-to-income ratio (DTI) of 43% or lower

6. Compare providers and read the fine print

Don’t hesitate to shop around and compare lenders. Check interest rates, fees, loan terms and payment options before signing any documents. And to stay safe, read the lender’s fine print before you fill out an application. Certain fees — like prepayment penalties or late fees — may not be listed until after you apply.

You should also be on the lookout for red flags that could indicate a scam. You’ll want to make sure your lender is registered in your state and has plenty of business information available so you can rest assured you aren’t giving your banking details to a fake company.

7. Gather your documents and information

Having the required documents on hand can make your application go a lot faster — the sooner you can get them in, the sooner you can get approved. Ask your lender which documents it requires before you get started. Typically it includes:

  • State-issued ID. Lenders generally accept driver’s licenses or passports.
  • Proof of employment. Generally lenders ask to see your last three pay stubs or a W-2 form.
  • Bank statements. This shows lenders how much money you have and can act as proof-of employment if you work for yourself.
  • Social Security number. Your lender needs a SSN to check your credit score.
  • Employer’s contact information. Some loan applications ask for your company’s contact information — and sometimes information about your former employers.

8. Apply for preapproval

Many lenders, including banks and credit unions, offer preapproval. This gives you a chance to view your potential rate and loan term based on the information you submit. It also gives you an easier way to compare: You can stack multiple offers against each other to find the best option before your credit score takes a hit.

Just remember that a preappoval offer isn’t finalized. Your lender may change your loan terms after doing a hard pull on your credit.

How to apply for a personal loan

Find the lender you want to work with then go to the its website and find the application for the loan. Fill out the basic information, such as your zip code and whether you’ll be filing for a joint or individual application. step 1
As you continue, you’ll be prompted to fill out more pages detailing your personal information and financial situation. step 2
Next you’ll input the loan information. This will be the amount you want to borrow and how long you’ll need to pay it back. Remember, the shorter the loan, the less you pay in interest. step 3
Once everything is filled out, verify that the information is correct and hit submit. You’ll typically be notified with a decision on your loan application within a few minutes — although some lenders may take multiple days. If you’re approved, your lender will contact you to confirm your information, and most people receive their loan funds as soon as one business day after approval.

What happens next?

The application process may vary slightly from lender to lender, but generally they all follow a format similar to the one above.

Receive your loan funds

Many lenders and banks require that you have a checking account to receive your loan via direct deposit, but that’s not always the only option. Some lenders will be able to send you a check — if this is important to you, ask your lender how it transfers funds.

Spend your loan

In most cases, you are free to spend your loan funds on whatever you’d like, with the exception of college expenses. If you took out a loan for something specific, like buying a car or consolidating debt, you should spend your loan funds on that.

Make your payments on time

It’s very important to make your payments on time so you don’t end up paying extra in fees or hurting your credit. Be sure to verify how you’ll need to make repayments. Can you pay by phone with a credit card or account number, online through the lender’s website or by mailing a check? Is there an automatic payment option? These will impact which lender you choose and how you’ll pay off your debt.

3 personal loan alternatives

Borrowing isn’t always the right option. If you’re not ready to commit to a loan — or still need to build your credit — consider these three alternatives:

  1. Savings. It might mean waiting, but saving money will be the least expensive option. By setting aside money each month in a savings account, you can earn interest rather than pay it — all while developing your budgeting skills.
  2. Pay advance. A pay advance can be borrowed through a dedicated app or offered directly by your employer. And while you may have to tip if you use an app, these are cheaper and faster than personal loans if you need to cover an emergency expense.
  3. Credit cards. It will typically have a higher APR than a personal loan, but a credit card can be a good option if you need to make a small purchase. However, check the rates before you apply: Credit cards have multiple fees that can add up quickly.

Compare personal loan providers

Updated October 18th, 2019
Name Product Filter Values APR Min. Credit Score Max. Loan Amount
3.84% to 35.99%
Good to excellent credit
$100,000
Get loan offers from multiple lenders at once without affecting your credit score.
Varies by lender
Available for all credit scores
$100,000
Get a connected with a lender — or get debt advice.
6.49% to 17.99%
650
$25,000
With over 80 years of lending experience, this credit union offers personal loans for a variety of expenses.
3.99% to 35.99%
500
$100,000
Quickly compare multiple online lenders with competitive rates depending on your credit.
6.98% to 35.89%
620
$50,000
Affordable loans with two simple repayment terms and no prepayment penalties.
34% to 155% (Varies by state)
550
$10,000
Check eligibility in minutes and get a personalized quote without affecting your credit score.
6.95% to 35.89%
640
$40,000
A peer-to-peer lender offering fair rates based on your credit score.
4.99% to 35.99%
Good to excellent credit
$100,000
Get personalized rates in minutes and then choose a loan offer from several top online lenders.
3.84% to 35.99%
550
$100,000
Get connected to competitive loan offers instantly from top online consumer lenders.
5.99% to 17.66%
680
$100,000
No fees. Multiple member perks such as community events and career coaching.

Compare up to 4 providers

Bottom line

Applying for a personal loan isn’t difficult if you prepare. And to get the best deal, learn more about personal loans so you can spot a lender that will meet your needs.

Frequently asked questions

Was this content helpful to you? No  Yes

Ask an Expert

You are about to post a question on finder.com:

  • Do not enter personal information (eg. surname, phone number, bank details) as your question will be made public
  • finder.com is a financial comparison and information service, not a bank or product provider
  • We cannot provide you with personal advice or recommendations
  • Your answer might already be waiting – check previous questions below to see if yours has already been asked

Finder.com provides guides and information on a range of products and services. Because our content is not financial advice, we suggest talking with a professional before you make any decision.

By submitting your comment or question, you agree to our Privacy and Cookies Policy and Terms of Use.

Questions and responses on finder.com are not provided, paid for or otherwise endorsed by any bank or brand. These banks and brands are not responsible for ensuring that comments are answered or accurate.

2 Responses

  1. Default Gravatar
    MarkApril 19, 2018

    I would need a 8,000. For a consultation loan. If nestle I do have a co-signer .

    • Default Gravatar
      ArnoldApril 20, 2018

      Hi Mark,

      Thanks for your inquiry

      If you think you meet the eligibility requirements, you can apply for a loan without a co-signer. However, if you think you don’t meet them you may need a co-signer to help you repay the loan if you default.

      Hope this information helps

      Cheers,
      Arnold

Go to site