Personal Loan Requirements: How To Apply For Financing

Quick Summary

• Shop rates with lenders that use a soft credit pull to avoid impacting your credit score
• Rocket Loans will consider your FICO^® score, income, homeownership, credit history, and DTI ratio (excluding your mortgage) to determine the rate and amount you may prequalify for
• You can get prequalified and apply for a personal loan with Rocket Loans entirely online using a secure digital process to quickly verify your income and identity

If you’ve decided for any reason that you need a personal loan, you may be wondering about the next step. Getting this type of financing can be fairly straightforward, but you’ll need to ensure that you meet the lender’s personal loan requirements to secure the interest rate you want.

Let’s walk through the common requirements for personal loan approval, the step-by-step process of getting a personal loan and where to find a lender.

What Are The Eligibility Requirements For A Personal Loan?

While personal loan eligibility requirements vary from one lender to the next, most lenders will check a few of the same items. When you submit an application for a personal loan, your lender will most likely verify your:

• Credit score: Like other types of loans, lenders will use your credit score to assess your financial situation and determine your interest rate. When applying with Rocket Loans, a credit score of 640 or higher is strongly recommended
• Payment history: When you apply for a personal loan, the lender will make a hard inquiry to check your payment history and see if you’ve ever missed a payment or defaulted on a loan. If so, your application might be declined, or you might be approved with a high interest rate.
• Annual income: Besides checking your credit and payment history, your lender will want to know your annual income. This will help them find a monthly payment and loan term that fits your monthly budget. Some lenders may even set a minimum income amount for all personal loan borrowers.
• Debt-to-income ratio (DTI): A DTI is a comparison of your monthly gross income against your monthly debt payments. Like your annual income, this helps the lender ensure you can afford the payment on your loan. Most lenders require a DTI in the 36% – 50% range. If you're a homeowner, Rocket Loans will calculate your debt-to-income ratio excluding your mortgage.
• Collateral: Most personal loans do not require collateral for approval. You don't need any collateral or down payment to qualify for a personal loan with Rocket Loans. However, some personal loans are secured, which means that if you choose this type of personal loan, you’ll need to find a valuable belonging you can use to secure it.

How To Get A Personal Loan In 6 Steps

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. With Rocket Loans, you can borrow from $2,000 to $45,000. Some lenders may offer up to $100,000 in extremely rare cases. When identifying the amount you need, it can also help to consider the timeline you're comfortable with for paying it off – Rocket Loans offers 36 and 60-month terms.

Some lenders including Rocket Loans may charge an origination fee, which is a one-time fee deducted from your loan when it’s funded. You may need to adjust your loan amount to make sure you receive the total amount you need after the fee is subtracted. The exact fee is based on your financial profile and the total amount you’d like to borrow. When you choose a transparent lender like Rocket Loans, this fee will be clearly disclosed before you accept your loan. Paying an origination fee up front can save you more over time compared to other lenders that offer a no-fee loan option with a higher interest rate.

2. Shop Around For The Best Rates

When figuring out how to get approved, you’ll want to compare multiple loan offers without impacting your credit score. Some lenders like Rocket Loans make it quick and easy to see how much you prequalify for using a soft credit pull, which won't affect your credit score. To get prequalified, the lender will require some basic information. Rocket Loans will show you prequalified offers instantly based on just a few details – the whole process can be completed in about 3 minutes on any device. You'll need to provide:

• Your name
• Homeownership status
• Current address
• Personal annual income (before taxes)
• Social Security number
• Date of birth

Once you’re prequalified, you should have an idea of the rates, terms and loan amount you can qualify for with a lender. (Please note that not all lenders offer this prequalification step.) If you see an offer you like from Rocket Loans, you can move straight into submitting a full application to apply for the loan.

3. Choose Your Lender

If you think you’ve found the right lender, be sure to read the fine print carefully to know the amount of money you’d be getting into before you sign on the dotted line. Especially keep an eye out 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.

4. Apply For The Loan

When you decide to submit a full application, you’ll typically be asked to provide additional information to verify your identity and income. Some lenders may ask you to provide pay stubs, tax forms, or bank statements. Rocket Loans makes it easy to verify your identity and income entirely online in most cases – no need to gather any paperwork.

• Verify your income: You'll be prompted to connect your bank account using Plaid, a secure intermediary that keeps your information encrypted. Rocket Loans will not have access to your bank login. Be sure to connect the bank where your income is deposited and your bills are paid.
• Verify your identity: You may be asked to provide documents such as a valid photo ID or driver's license.

5. Wait For Approval and Funding

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.

Rocket Loans offers same-day funding, meaning you could receive your money the same day you’re approved – which can happen the same day you apply. Same-day funding is available when you complete the loan process and signing the Promissory Note by 4 pm ET on a business day. The ACH credit will be submitted to your bank the same business day. This often results in same-day funding, but results may vary.

When your loan closes, lenders generally run a hard credit check which can cause a small, temporary drop in your credit score (1 – 5 points).

6. Start Making Your Monthly Payments

With most lenders, borrowers will start paying back their loans within 30 days of receiving their funds. As an installment loan, a personal loan is typically paid back through monthly payments over a set period of time, or term. The exact amount of your monthly payment, including interest, will depend on your lender, your loan terms and your interest rate.

Many Rocket Loans clients choose to set up autopay when finalizing their loan for a 0.3% rate discount. If you choose autopay, your monthly payments will automatically be withdrawn from your linked bank account on your due date. If you want to make payments manually or update your payment method, you can manage your account by logging into the MyRocket dashboard – this is the same dashboard where you manage your mortgage, if you're a Rocket Mortgage client.

Where Can You Get A Personal Loan?

In addition to traditional banks, the two main types of lenders likely to offer personal loans 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.

Banks

Traditional banks may require a different minimum credit score than other types of lenders, and they could consider factors besides your income and credit score. These requirements may include how long you’ve had your job and how long you’ve lived at one address. (If you’re wondering whether you can get a loan without a job, it depends on the particular 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. These include your employment history, education and income.

Credit Unions

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

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 the requirements for a personal loan will vary from online lender to online lender. Rocket Loans generally requires a credit score of 640 or higher.

With most online lenders, the entire application process can generally be completed online, but it's important to consider whether customer support is available when you need help. If you prefer an online experience that also lets you talk to a real human, look for a lender like Rocket Loans which offers excellent customer support from personal loan specialists based here in the U.S.

Many people choose an online lender for the convenience of a digital ecosystem over the life of their loan – a personal loan from Rocket Loans can be managed in the same dashboard as a mortgage from Rocket Mortgage, for instance. Online lenders like Rocket Loans may also appeal to borrowers based on a certain specialty or niche, such as personal finance and homeownership.

FAQs About Getting A Personal Loan

Learn more about personal loans and lender requirements from the answers to these frequently asked questions.

What can I use a personal loan for?

One of the major advantages of a personal loan is that borrowers can use one for almost any situation, such as:

• Financing a small business
• Making a major purchase
• Funding home improvement projects
• Paying for auto repairs and maintenance
• Paying for medical expenses
• Planning for a family
• Consolidating credit card debt

What are some common personal loan qualifications?

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. Your eligibility also includes factors such as your annual income, payment history and DTI.

How can I improve my credit to qualify for a personal loan?

Improving your credit before applying for a personal loan may help improve your chances of qualifying for the amount you need, and may even help you secure a better rate. We recommend using a personal financial management tool like Rocket Money, which has free features to help you improve your financial health and make progress toward your money goals.

How does the personal loan application process work?

The application process for a personal loan can differ depending on which lender you choose. But, in most cases, you’ll provide the lender with your personal information using a loan application. They’ll then run a hard credit check to make sure you can afford the monthly payments and eventually pay off the loan in full.

Final Thoughts

If you decide a personal loan is the right option for you, be sure to shop around for the best deal. You’ll want to know the specifics, such as the APR, interest rate, your monthly payment amount and the time it’ll take to pay the loan off. Don’t overlook the fine print, either. You’ll want to be aware of any prepayment penalties, late fees or other fees before you apply for 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.