How To Get A Personal Loan
6-Minute ReadFebruary 24, 2022
If you’ve decided, for any reason, that you need a personal loan, then you may be wondering what the next step is. Getting a personal loan can be a fairly straightforward process, but doing it the right way can help you get the loan and the rates that work best for you.
This article will go through the step-by-step process of how to get a personal loan, along with tips for getting approved.
Personal Loan Requirements
One of the major draws of a personal loan is that borrowers can use one for almost any situation, such as the following:
- Financing a small business
- Making a major purchase
- Funding home improvement projects
- Auto repairs and expenses
- Medical expenses
- Family planning
- Consolidating debt
Wherever you look to get a personal loan, you'll need to make sure you qualify. While it depends largely on the lender, the minimum credit score you'll need to get a personal loan usually falls anywhere between 600 and 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-to-income (DTI) ratio and debt history. Your eligibility also includes other factors such as your entire financial situation and income as an individual borrower.
Other than that, if you’re at least 18 years old, or the legal age required in your state, and have your required documents together, you should be eligible for a personal loan.
Personal loans are also typically 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, which shouldn’t change during the duration of the loan, meaning your payments will be the same every month.
How To Get A Personal Loan In 7 Steps
If you think a personal loan is what you need, follow these steps to get your cash in hand.
1. Figure Out How Much You Need
It may seem obvious, but knowing the loan amount you need to borrow is essential for getting a personal loan. Most lenders and lending platforms can loan up to $45,000 per borrower – and even $100,000 in extremely rare cases. There’s more to think about than if you can pay back what you borrow.
Find out if your lender charges an origination fee for the loan, and be sure to account for any additional fees that go along with it. Interest rates can also make a huge difference in your monthly payment, so make sure you have it within your budget to afford these additional expenses and still have enough in the loan to use it for what you borrowed it for.
2. Check Your Credit Score
If your credit score is not currently within the desired threshold for most lenders requirements, you may want to hold off on applying and instead focus on improving your current score. Paying your bills, credit card payments and other expenses on time will help keep your credit score at a good level.
Most experts recommend getting a copy of your credit report before applying and taking a look at any factors that could affect your eligibility. If you see errors on your credit report that may be hurting your credit, make sure to correct them so that lenders don't use inaccurate information when deciding whether to lend you money.
3. Shop Around For The Best Rates And Get Prequalified
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 won’t affect your credit score). You are able to prequalify through multiple lenders which will help you compare the best rates and terms.
To get prequalified, the lender will require some basic information, including:
- Your name
- Current address
- Income information
- Social Security number
- Date of birth
Once you’re prequalified, you should have an idea what rates, terms and loan amount you can qualify for with a lender.
4. Choose Your Lender
If you think you’ve found the right lender, be sure to read the fine print carefully to know what you’d be getting into before signing that dotted line. Keep an eye out in particular for fees and penalties, automatic withdrawal options and the estimated annual percentage rate (APR). Once you’re sure you’ve found the best deal, you can move forward with the application process.
5. Apply For The Loan
When you decide to submit a full application, you'll typically be asked to provide:
- Bank account information
- Personal identification or driver's license
- Pay stubs
- Bank statements
- Tax forms
Some lenders might ask for some of these documents during the prequalification process as well. To save you time and minimize hassle, it's a good idea to start gathering all your financial documents when beginning your search.
Getting approved for a personal loan will also require a hard inquiry, which can temporarily lower your credit score. If you plan to apply through multiple lenders, try to apply for all within 14 – 30 days. When you do this, credit bureaus will likely treat these applications as one hard inquiry rather than multiple inquiries. This can help minimize the impact it may have on your credit score.
6. Wait For Approval
Approval for a personal loan can generally take 1 – 3 business days, and if approved you can expect to see your funds in your account within 1 – 5 business days after that.
Borrowing through Rocket Loans℠ can qualify you for same-day financing, meaning you could receive your money the same day you’re approved.*
7. Start Making Your Monthly Payments
With most lenders, borrowers will start paying back their loan within 30 days of receiving their funds. As an installment loan, a personal loan is typically paid back through monthly payments for a set period of time, or term. The amount of your monthly payment, including interest, will depend on your lender, your loan terms and your interest rate.
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.
In addition to traditional banks, the two main types of lenders likely to offer a personal loan are credit unions and online lenders. Whether you're applying for a loan online or in person, each lender has its pros and cons, and looks for something different in the application process.
As a nonprofit financial institution, a credit union will be more likely to work with you if you have a low credit score. You'll need to join the credit union before applying, however. A credit union is also your best bet if you're looking for a smaller loan – around $2,500 or lower. In some cases, a credit union might be the only place that even offers such a small personal loan.
Online lenders offer a diverse range of personal loans, catering to the full gamut of credit scores – from high (720 and up) to poor (629 or lower). This means that the requirements for a personal loan will vary from online lender to online lender. Generally, however, you can expect to go through a prequalification process including a soft credit check. You might also be able to benefit from additional offers, such as no fees or variable interest during repayment.
FAQs About Getting A Personal Loan
Below are a few of the most commonly asked questions individuals have when applying for a personal loan.
How can I get a personal loan from a bank?
Different lenders – traditional banks, credit unions and online lending companies – have their own criteria for creditworthiness.
Traditional banks may require different minimum credit scores, and will consider other factors such as your income. (If you're wondering whether you can get a loan without a job, it depends on the lender's requirements.) Keep in mind, however, that 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 traditional bank, credit union or lending company before committing to your lender.
How can I get a personal loan with bad credit?
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 if you own your own business.
If your credit isn’t in the best place, take steps to improve your credit score so you can qualify for better loan rates.
How does the loan application process work?
The application process for a personal loan will vary depending on which lender you choose. Watch this video to learn more about Rocket Loans financing process and personal loan application:
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. Don't overlook the fine print either. You'll want to know if there are any prepayment penalties, late fees or other fees to get a loan in the first place.
Ready to start your application? Apply for a personal loan with Rocket Loans today.
*Same-day funding is available for clients completing the loan process and signing the Promissory Note by 1:00 p.m. ET on a business day. Also note, the ACH credit will be submitted to your bank the same business day. This may result in same day funding, but results may vary, and your bank may have rules that limit our ability to credit your account. We are not responsible for delays that may occur due to an incorrect routing number, an incorrect account number or errors of your financial institution.
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