How To Get A Personal Loan
Sometimes you need a loan – perhaps you’re trying to purchase a new car 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, well, personal. Borrowers can use personal loans for almost any situation: to support 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 also 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 – meaning 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.
Different lenders will require different 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 bank, credit union or lending company before committing to your lender.
What Are The Personal Loan Requirements?
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 which may not affect your credit score). To get prequalified, the lender will require some basic information, including:
- 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 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.
A lot of lenders will list their 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 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 history.
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.
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 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 their pros and cons, and looks for something different in the application process.
As a non-profit 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 that doesn’t impact your credit score. You might also be able to benefit from additional offers, such as no fees or variable interest during repayment.
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 before applying and taking a look at any factors that could affect your eligibility. It’s also a good idea in general to check your credit score to see where you stand. If you see errors on your credit report hurting your credit, make sure to correct them so that lenders don't use inaccurate 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 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:
Ready To Shop For 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. 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.
Whatever your financial needs, Rocket Loans is here to help. Tell us what you need and we'll help you find the perfect loan for you.
Table of Contents
Home Equity Loan Vs. Personal Loan: Which Is Better For You?
A home equity loan and personal loan can both be good for various needs. Learn the differences between these types of loans and decide which is better for you.
The 5 Best Reasons For A Personal Loan
What are the best reasons for a personal loan? Before signing the dotted line, make sure you understand what you can and can’t use them for.