How to Get a Personal Loan
Sometimes you need a loan – perhaps you’re trying to pump extra cash into your business or you need funds to put on a new roof. Many people also take one out to consolidate high-interest loans or save money on interest.
Whatever the reason, you’ll want to learn how to get a personal loan. We’ll go over exactly what a personal loan is, what you may use it for and how to go about getting one.
What is a Personal Loan?
One of the major draws of a personal loan is that it's personal. Borrowers can use personal loans for almost any situation: a small business, to make a major purchase, for home improvement, car expenses, medical expenses, family planning or to consolidate debt. That’s why it’s such a major draw for most folks – it’s a flexible loan.
Personal loans are unsecured, meaning you don’t need to put up any collateral like a car or your home. They usually come with a fixed interest rate – the interest rate won’t change during the duration of the loan and your payments will be the same every month.
How Much Will a Bank Give Me for a Personal Loan?
In terms of how much you can get for a personal loan, different lenders – banks, credit unions and online lending companies – have their own criteria for creditworthiness.
Lenders will require different credit scores and other factors such as your income (if you’re wondering whether you can get a loan without a job, it depends). However, if the minimum requirement for a credit score is lower, other factors might be weighted more heavily, such as your employment history, education or income.
You’ll want to do your research and check the lending requirements for a bank, credit union or lending company.
What Are the Requirements to Get a Personal Loan?
When figuring how to get approved for a personal loan, you’ll want to compare offers. That means first getting prequalified (which is considered a soft credit pull and may not affect your credit score).
- Your name
- Current address
- Income information
- Social Security number
- Date of birth
When you decide to submit a full application, you’ll typically be asked to provide:
- Bank account information
- Driver’s license
- Pay stubs
- Bank statements
- Tax forms
Some lenders might ask for some of these documents during the prequalification process. To save you time and minimize hassle, you might want to start gathering financial documents when beginning your search.
A lot of lenders will list these requirements on their website. If you have any questions or would like greater specifics, you can always reach out and speak to a loan expert to gather more information.
What Kind of Credit Score Do You Need to Get a Personal Loan?
While it depends largely on the lender, the minimum credit score you’ll need to get a personal loan usually falls anywhere between 600 to 700. Generally speaking, the higher your score, the better your chances of approval, as well as the most competitive rates and terms. Lenders will also consider your debt history and whether you own a home.
If you have fair or average credit, it’ll be tougher for you to get approved. A credit score is a major part of determining your creditworthiness, but it doesn’t show lenders your entire financial profile. Your income gets considered, as well as your employment history in some cases. Additional documents may be needed if you’re self-employed or own your own business.
Understanding how to get approved for a personal loan with a bad (or limited) credit score means you need to come to terms with the fact that you probably won’t land the best terms or rates.
If you do qualify for a personal loan with bad credit, you can expect higher interest rates, lower approval amounts and less favorable terms.
Where to Get a Personal Loan
You don’t have to step into a brick-and-mortar bank to apply for a personal loan – there are many online lenders offering competitive terms and rates.
Wherever you look to get a personal loan, you’ll need to make sure you qualify. You’ll typically need to meet a lender’s minimum credit score. It also includes other factors such as your entire financial situation, income as an individual borrower and debt-to-income ratio.
That’s why most experts recommend getting a copy of your credit report and taking a look at any factors that could affect your eligibility. It’s also a good idea to check your credit score to see where you stand. If you see errors on your credit report, make sure to correct them so that lenders don’t use false information when deciding whether to lend you money.
To boost your odds of getting qualified, you’ll want to show that you rake in a steady income and pay your bills and debts on time
How Does a Loan Application Process Work?
Watch this video to learn more about our Rocket Loans financing process and personal loan application:
Should I Get a Personal Loan?
Taking on a personal loan will depend on your specific needs. Consider whether you’ll be able to afford the payments and whether the loan is necessary.
If you decide that a personal loan is the option for you, make sure you shop around to find the best deal. You’ll want to know the specifics, such as the APR, interest rate, what your monthly payments will look like and the time it’ll take to pay off.
There’s also the fine print. You’ll want to know if there are any prepayment penalties, late fees or other fees to get a loan in the first place.
Shopping around for personal loans will help shave off some of the stress of getting one that fits your needs.
Table of Contents
Home Equity Loan Vs. Personal Loan: Which is Better for You?
What’s the best choice for you? We’ll show you the similarities between a home equity loan vs a personal loan and what to consider before applying for either one.