How to Apply for a Personal Loan

While specific criteria varies by lender, most share similar requirements, including a minimum credit score, proof of income, and identification documents. Here’s what you’ll typically need to apply for a personal loan:

• Sufficient credit score: Credit score requirements vary by lender. If you have a FICO^® score of 670 or above, you have a decent shot at getting favorable terms. Your approval odds may drop if your score falls below 579.
• Proof of income: Lenders review tax returns, bank statements, or pay stubs to verify that you can afford repayment.
• Low debt-to-income ratio: Many lenders want your debt-to-income ratio, or DTI, under 36%. You can calculate yours by dividing your monthly expenses by your gross monthly income.
• Contact information: This includes your address, phone number, email, and Social Security number.
• Proof of address: A utility bill or lease can confirm where you live.
• Proof of identity: You may need to provide your driver’s license, passport, military ID, certificate of citizenship, or state ID.

The total cost of a personal loan depends on your APR and loan term. You’ll repay both the principal amount you borrowed, plus interest charges and any fees.

For example, let’s say you borrow $5,000 with a three-year repayment term. If your APR is 10%, your monthly payment would be around $161, and you’d pay about $800 in total interest. But if that same loan had a 20% APR, your monthly payment would jump to roughly $186, costing you nearly $1,700 in interest over the life of the loan.

That’s why comparing offers matters – a lower rate can save you hundreds or thousands of dollars. Watch for origination fees too, which some lenders deduct from your loan amount upfront and may cost up to 10% of your loan amount.

Here are the steps you can take when you’re ready to apply for a personal loan.

Step 1: Determine how much you need to borrow

Personal loan amounts typically range from $1,000 to $100,000. Borrow only what you need since you’ll repay the full amount plus interest.

Consider the following to get a loan that fits your budget:

• The total cost: How much you need to cover the full expense
• Your savings: Whether you can use existing funds to reduce the loan amount
• Repayment ability: Your monthly income and existing financial obligation

Apply for the smallest loan possible to cover your expenses, and learn how to calculate interest on a loan so you know what to expect.

Step 2: Check your credit

Your credit score shows lenders how you handle debt and influences your loan terms and approval odds.

FICO scores fall into the following ranges:

• Exceptional: 800 – 850
• Very Good: 740 – 799
• Good: 670 – 739
• Fair: 580 – 669
• Poor: 300 – 579

Check your score before applying through the major credit bureaus – Equifax, Experian, and TransUnion – or at myFICO.com. Many credit card companies also offer free FICO scores.

If you have a good to exceptional score, you’ll have an easier time getting approved with better rates. If your score falls in the fair or poor range, you may face higher rates and fees.

If your credit score needs work, there are ways to improve your credit before applying, such as:

• Paying down your existing debt
• Making on-time bill payments
• Getting a secured credit card
• Removing collections from your credit report

Some lenders also let you apply with a co-borrower, which could boost your chance of approval.

Step 3: Research and compare lenders

Shop around with different lenders for the best rates and terms. You can find personal loans with online lenders, credit unions, and traditional banks. When comparing, consider each lender’s available loan amounts, annual percentage rates, or APR, interest rates, and term lengths.

Review each lender’s eligibility requirements to make sure you qualify. Many lenders let you pre-qualify online, meaning you can check rates and compare offers without harming your credit score.

Step 4: Fill out a loan application

Once you’ve chosen a lender, fill out the loan application. You can often complete an application form online in minutes or visit a bank branch in person.

Some lenders may review and approve your loan the same day, while others take longer to return a decision.

Step 5: Accept the loan offer or consider alternatives

Once the lender decides on your application, they’ll communicate that decision to you. If approved, the lender will send final loan documents detailing:

• Loan amount
• Interest rate and APR
• Loan term
• Repayment terms, including the monthly payment amount

Some lenders charge an origination fee, which they deduct from the total cash you receive. A typical origination fee is between 1% and 10% of the total loan amount.

If the terms work for you, accept the offer and wait for the lender to send your funds. Some online lenders offer same-day funding, while others may take longer to deposit money into your account.

If the loan terms don’t meet your expectations, you don’t have to accept and could keep shopping around for a better deal.

Most borrowers get approved within minutes to a few days and receive funds anywhere from the same day to a week later, depending on the lender and your credit profile.

Online lenders

Online lenders offer the fastest turnaround with instant prequalification and approval within minutes. You may receive funds the same day or within one to three days with direct deposit.

Banks and credit unions

Traditional banks and credit unions may take longer due to additional verification steps or manual reviews. Expect funding in about one to five business days from application to deposit.

Factors that can affect loan timing

Several factors influence how long it takes to receive your funds:

• Credit score and history: Borrowers with strong credit may be approved faster.
• Loan amount: Larger loans sometimes require additional verification.
• Documentation: Submitting complete, accurate paperwork helps speed things up.
• Application timing: Applying early in the business day or week may help you avoid delays.
• Bank processing times: Even after approval, it may take one to two business days for your bank to make the funds available.

If you need money faster

If you need funds urgently, consider applying with an online lender that offers same-day or next-day funding. Prequalifying in advance and setting up direct deposit can also help shorten the process.

Getting a personal loan with bad credit can be tough, but it’s not impossible. Start by checking your credit report for errors and paying down debt – even small improvements can help.

Lenders also look at your income and employment history, so showing steady paychecks can strengthen your application. If your credit alone isn’t enough, you might apply with a co-signer who has better credit or explore a secured loan backed by collateral.

Be cautious with lenders promising “guaranteed approval” or skipping credit checks – these loans often come with high fees and interest. Focus on reputable online lenders, credit unions, or community banks that work with borrowers rebuilding credit.

Lenders may deny applications due to low credit scores, high debt, or requesting too much. Don’t get discouraged – you can take steps to improve your chances.

The Fair Credit Reporting Act and Equal Credit Opportunity Act require lenders to provide an adverse action notice explaining why your application was rejected. Read this letter carefully to understand what to work on.

Some steps that could help include:

• Paying off credit card debt
• Finding and removing incorrect information from your credit report
• Growing your income
• Asking someone you know to cosign the loan
• Applying for a smaller loan amount

Personal loans aren’t your only option for getting funding – here are some alternatives worth considering:

Home equity loan or line of credit

If you own your home, you can borrow against your equity via a home equity line of credit, also known as a HELOC, or a home equity loan. These secured loans use your home as collateral, often resulting in lower APRs than personal loans.

However, your home acts as collateral, so failing to repay can mean losing your home. Learn the differences between a line of credit and a loan to figure out which option is best for you.

Credit cards

Credit cards with 0% introductory APR can work for emergency expenses if you pay in full before the promotional period ends. Otherwise, interest can add up quickly.

Paycheck advance

You can consider a paycheck advance for small expenses. This lets you borrow from an upcoming paycheck, meaning you’re using money you’ve already earned.

Following these steps can help you apply for a personal loan that fits your budget and needs. Compare offers from multiple lenders and make sure monthly payments work with your income before you commit.

Find out how to get approved for a personal loan for more details on lending requirements.