Personal Loan Documents: What You Need To Get A Personal Loan
Hanna Kielar6-Minute Read
UPDATED: July 06, 2023
If you want to get approved for a personal loan, you’ll first have to prove to your lender that you’re reliable and prepared to take on this new fiscal responsibility. In order to do this, you’ll need to assemble the various types of personal and financial documentation required by your loan lender, including your proof of identity, recent bank statements and pay stubs. Luckily, most lenders request similar information during the application process.
Let’s take a look at the types of personal loan documents you’ll need to apply for this type of loan.
What Documents Are Needed For A Personal Loan?
When you apply for a personal loan, you’ll most likely be asked to provide a series of official documents to the lender. Use the following list as a guide to preparing your application, but don’t forget to review your lender’s specific loan documents for personal loan requirements.
1. Loan Application
Once you’ve settled on a lender for your personal loan, the next step is to review their loan application. Although every lender has a different application, they typically require you to provide information such as personal details, the desired loan amount and the intended purpose of the loan.
Many loan applications are easily accessible through the lender’s website, but some traditional lending institutions – such as banks or credit unions – may offer in-person applications.
2. Proof Of Income
Since most personal loans are unsecured and don’t require the borrower to put down collateral, they can be riskier for lenders. To check whether you have the financial ability to repay your loan, the lender will most likely request income verification.
Be prepared to certify your income with the following documents:
- Pay stubs
- Bank statements
- Tax returns
- Employer name and contact information
If you’re self-employed and applying for a personal loan, you’ll need to submit slightly different information. Self-employed applicants can show proof of income using the following documents:
- Profit and loss statements
- Social Security benefits statements
- Court-ordered agreements
- Income tax returns
3. Proof Of Identity
Most American lenders require you to submit at least two forms of government-issued identification as part of your personal loan application. This requirement ensures that you’re a U.S. permanent resident or citizen.
Plan to submit at least two of the following documents:
- State-issued ID
- Driver’s license or personal identification
- Birth certificate
- Military ID
- Social Security card
- Certificate of citizenship
4. Proof Of Address
Similar to proof of identity, lenders need to verify the stability of your living situation. To confirm your proof of address, prepare to submit the following documents:
- Voter registration card
- Recent utility bill or water bill
- Lease or rental agreement
- Proof of home or vehicle insurance
What Else Do You Need To Get A Personal Loan?
While organizing your personal loan documents is key, there are other actions to check off your pre-application to-do list. Before hitting “send” on your loan application, be sure to consider the following ways to get a personal loan.
A Good Or Excellent Credit Score
It’s important to check your credit score often, but it’s extra critical to verify your score prior to submitting a loan application. With personal loans, applicants with a higher credit score are more likely to receive a lower interest rate and more favorable loan terms.
Double-check your credit report to ensure that it’s accurate and up to date. If you spot any inaccuracies in your report, be sure to correct them before applying for a loan. Also, take any other necessary steps to improve your credit score.
A Low Debt-To-Income Ratio
Your debt-to-income ratio (DTI) is the percentage of your monthly income that’s used to pay down existing debt. Loan lenders examine your DTI to determine your current level of debt and how it could affect your ability to repay a new loan. If your DTI is above 36%, you may have difficulty securing a loan.
With that in mind, loan applicants should ensure that their DTI is as low as possible when applying for a personal loan. If your current DTI is higher than the recommended percentage, it may be advisable to pay off more of your debt before submitting a loan application.
Prequalification For A Personal Loan
If you want to review your payment estimates before committing to a loan lender, consider prequalifying for a personal loan. Prequalification allows you to preview the loan terms and rates that the lender is planning to give you without affecting your credit score.
During the prequalification process, the lender will evaluate your personal information and perform a soft credit check to determine your eligibility. This is a helpful step to take prior to submitting a loan application to ensure that your new loan fits your budget and needs.
What If You Aren’t Approved For A Personal Loan?
If for any reason you’re unable to get a personal loan, there may be ways to improve your odds of being approved. Or, you might look at alternative financing options such as the ones described below.
Reconsider Your Loan Amount
You can typically apply for $1,000 – $50,000 from most personal loan lenders, but higher amounts may call for stricter credit requirements. Consider your situation and decide if you could get by with a lower loan amount and reapply.
Choose A Secured Loan
Unsecured personal loans are far more popular, but some lenders may offer secured loan options. Putting up collateral for a loan could boost your chances of getting your application approved more so than just your creditworthiness. Check with your desired lender and see if they offer secured loans.
Have A Co-Signer On Your Loan
A co-signer adds their name to your loan application and takes legal responsibility for paying the loan if the borrower fails to make their payments. This can act as extra security for a lender who’s otherwise unsure about an applicant’s credentials.
Improve Your Creditworthiness
If your credit score just isn’t high enough for a personal loan with a good interest rate, take steps to repair your credit and try again once it’s improved. The minimum credit score accepted by most lenders is 580, but you should aim for at least 650 to secure a better interest rate.
Consider Using A Credit Card
Credit cards tend to have high interest rates – currently around 25% on average – but can be a good option for purchases under $1,000. Some credit card companies may offer introductory rates of 0%, where for a limited time – no more than 21 months – you can make payments on your card without interest.
FAQs Regarding Personal Loan Documentation
Have more questions about personal loans and their required documents? See if the frequently asked questions below give you answers.
Is it hard to get accepted for a personal loan?
Personal loan applications are known by many borrowers to be simple and straightforward. If you’re able to provide all the required documents and your credit is in good shape, the application process shouldn’t be too difficult to get through.
What disqualifies me from getting a personal loan?
You can be instantly rejected for a personal loan if you’re unable to provide the necessary documentation, such as proof of your income, address and identification. Make sure you have these documents organized and ready to go if you’re thinking of applying for a loan.
Having too low of a credit score or a bad credit history can also disqualify you from getting a personal loan, so make sure to check your credit report before applying.
What is a no documentation personal loan?
An alternate type of personal loan is a no documentation personal loan, which is a high-risk loan that’s provided without reviewing the applicant’s financial information.
Also known as no income verification loans, these secured or unsecured loan products are only offered by select loan lenders that are willing to take on risky investments. Due to the uncertain nature of this type of loan, lenders typically charge higher fees and higher interest rates to offset the risk.
Final Thoughts: Prepare Your Personal Loan Documents Carefully
Personal loans can fund almost anything from a kitchen renovation to debt consolidation, but no matter how you plan to use the money, you’ll have to prepare a complete personal loan application. To put your best foot forward, be sure to assemble the required loan documents and provide all of the information your loan lender requests.
If you have all your documents ready, you can start the application process today with Rocket Loans℠.
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