How To Apply for a Personal Loan

We’ll take you step by step through the process

Senior woman working on a calculator at her kitchen table with laptop and documents nearby
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Many people take advantage of personal loans to consolidate debt or manage large expenses like home renovations or repairs, a vacation or wedding, or even a relocation.

It is possible to complete the entire personal loan process online, from prequalification to signing your loan documents. This guide will walk you through each step so you can breeze through your application if you decide a personal loan can help you with a financial obligation.

Key Takeaways

  • Getting prequalified for a loan allows you to compare offers and narrow down the best lenders.
  • Your credit score will play a large part in whether you qualify for a personal loan and the terms you're offered.
  • You can often complete a loan application and sign the documents entirely online.
  • You may be able to get a same-day approval decision and have the loan deposited into your account the next business day.

Check Your Credit Score

First up in applying for a personal loan is recognizing the importance of your credit score, which reflects your track record with repaying amounts you owe. It gives lenders a way to gauge how you’ve been able to handle credit in the past and measure your risk of defaulting on loan payments in the future.

Having a higher credit score indicates you have a positive borrowing history and will have an easier time getting approved for a loan with a low interest rate. A low credit score, on the other hand, may indicate you either haven’t had much experience with credit or that you’ve struggled with it in the past. As a result, you may have a harder time getting approved for a loan, or the terms may not be as favorable.

Checking your credit score before applying for a personal loan gives you a chance to see your credit rating before you start the process. You'll have an idea of your approval odds and the interest rate you're likely to receive.

Because there are two main credit score providers and even numerous versions of scoring models from each provider, there's a chance a lender's score will differ from the score you access online.

Apply for Prequalification

Once you know your credit score, you can get a feel for your approval odds even further, as well as the terms you may qualify for by getting prequalified. Many lenders allow you to go through this process directly on their websites. You'll answer a few questions about the loan amount and your finances, and the lender will show you a tentative offer.

If you're planning to get prequalified, look for lenders that do a soft credit inquiry. If possible, you'll want to avoid a potentially credit-damaging hard inquiry that can make it harder to get approved for the best deals, especially if you’re getting inquiries from multiple lenders.

Just because you prequalify for a loan does not guarantee you'll be approved. It only means the lender is likely to approve your loan application based on the preliminary information you’ve provided.

Look at Loan Offers

Shopping around among a few different lenders gives you a chance to review offers and choose the best one without having to apply with multiple lenders. If you have a few pre-qualified offers, compare the features between each to select the best deal.

APR

The APR, which stands for annual percentage rate, includes both the interest rate and fees charged on your loan, and represents the cost of the loan. Is the interest rate fixed for the life of the loan, or is it a variable rate that will change? Both your monthly payment and the total amount you pay over the life of the loan are impacted by the APR.

Term

Take a look at the repayment options you're offered. Being able to choose a shorter term will allow you to save money on interest, but will result in a higher monthly payment. A longer repayment period will provide you with a lower monthly payment but will cost more in the long run.

You can use a personal loan calculator to get an idea of how much you’ll pay in total for a loan with a given term and APR.

Fees

Make sure to read the fine print and understand the fees you may have to pay for the loan. For example, some loans charge an origination fee for processing your loan application.

Apply

Once you've narrowed your personal loan options, you're ready to apply. To help the lender take a closer look at your credit and finances, the full loan application will ask for more information than you gave for prequalification. You may also be asked to provide documents to verify the information you put on your application. 

Here’s a checklist of what is generally required: 

  • Offer code (if you're responding to a promotion you received via mail or email)
  • Identification (you may have to upload a copy of your driver's license)
  • Social Security number

Some lenders may also ask for:

  • Employment information
  • Proof of income (i.e., pay stubs, W-2s, or recent copies of your bank statements)
  • Tax return

Some lenders may be willing to use alternative data like rent payments, mobile phone payments, cable TV payments, and bank information to approve your application.

The lender will review your application and give you an approval decision—some within 24 hours or less, others take several days.

Accept, Close, Manage, and Start Paying

Once you're approved, the lender will send you documents to sign and finalize your loan. These documents will spell out all the details about your loan, including the full amount, term, interest rate, APR, and monthly payment. This is your chance to review all details and make sure you're satisfied with the terms of the loan.

After submitting the signed loan documents—some lenders let you do this electronically—the loan will be processed and you will either receive a check by mail or have the funds deposited into your bank account as requested.

Mark your calendar for your first payment due date so you don't miss it. Due dates vary by lender (sometimes even by loan type); the first payment will generally be due about 30 days after you finalize your loan. Check your loan documents or contact the lender to verify the due date for your first payment. Be sure to make your monthly payments on time to avoid late fees and damage to your credit score. You may want to put them on autopay, especially if the APR and monthly payment amount are fixed.

In the event your application is denied, the lender will send a letter explaining why you were turned down, known as an adverse action notice​. If your credit report played a role in the decision, you'll receive the name of the credit agency that supplied the report with a note letting you know you’re entitled to a free copy of that report and can dispute the accuracy of the information in it if it’s wrong. The lender will also let you know what your credit score is if they used a credit score to make the decision.

Frequently Asked Questions (FAQs)

What do you need to apply for a personal loan?

To apply for a personal loan, you generally need to be a U.S. citizen or permanent resident over age 18. You'll also need to provide personal information, including your name and Social Security number, identification, income documentation, and employment information. In some cases, you may need to provide a tax return as well.

Will my personal loan affect my credit score?

Taking out a personal loan can affect your credit score. Opening a new account and increasing the amount of debt you owe can both lower your credit score in the short term. That may be somewhat offset by a small boost that comes from adding an installment loan to the types of credit you have, especially if you don’t have any other installment loans currently. Your credit score may increase over time as you pay your balance down and your account gets older.

How long does it take for an application to be approved?

Application approval timing for a personal loan varies by lender—you may get a same-day approval decision, or it may take several days. While you're waiting for a decision, you may be able to access your latest application status online. 

How long will it take to receive the money?

You may receive loan funds immediately or as soon as 24 hours after approval, depending on the lender. It may take longer to receive the money if you've opted for a check rather than having the loan deposited into your bank account.