How to Apply for a Personal Loan

The process of applying for a personal loan may feel overwhelming if you don’t know where to begin or what you need.

Below are five steps and common questions to help you through the process of choosing and applying for the best personal loan for your financial situation.

Step 1: Check your credit

Start the process by checking your credit. The interest rate and loan amount you receive depend a lot on your credit score, so reviewing your credit report lets you spot and fix any errors — like a falsely reported late payment — and strengthen your score before applying for a personal loan.

How does my credit score impact personal loan offers?

Good- or excellent-credit borrowers (those with scores of 690 or above) typically receive lower rates and have a wider group of lenders to choose from. On the other hand, bad- and fair-credit borrowers (scores below 690) may have fewer options and receive higher interest rates.

How do I see my credit score for free?

You can get a free credit score and credit report with NerdWallet. You can also request free credit reports directly from the three major credit bureaus at AnnualCreditReport.com.

Step 2: Pre-qualify and compare offers

Pre-qualifying for a personal loan gives you a preview of estimated rates, monthly payments and terms before you submit a formal application. Many lenders allow prospective borrowers to pre-qualify on their websites.

Will pre-qualifying affect my credit score?

No, pre-qualifying for a personal loan requires a soft inquiry, which doesn’t affect your credit score.

What do I need to pre-qualify for a personal loan?

To pre-qualify, you’ll need to submit information such as:

• Loan purpose. Unsecured personal loans can be used for almost anything, and most lenders ask how you intend to use the money.  

• Requested loan amount. Lenders typically offer personal loans from $1,000 to $50,000.

• Preferred loan term. Personal loans usually have repayment terms from two to seven years.

• Personal and financial information. This could include your name, email address, date of birth, address, income and Social Security number. 

If you’re unable to pre-qualify for a loan on your own, consider a co-signed or joint loan. Adding someone with a strong credit score and higher income can help you get approved and lower your rate. But keep in mind that a co-borrower or co-signer will be required to make loan payments if you fail to.

» MORE: Compare personal loans with co-signers

How long will it take to pre-qualify?

Pre-qualifying can take up to a few minutes after you submit your information. If you qualify for a loan offer, the lender will show you potential rates and terms to choose from.

Step 3: Choose your lender and loan

The best personal loan is usually the most affordable one. Carefully consider things like APR, monthly payments and fees before you accept an offer.

• APR: The annual percentage rate is the total cost of borrowing and includes your interest rate and all additional fees. The lower the APR, the lower the cost of the loan. 

• Loan term: The loan term is how long you will be paying off the loan. A longer term can lower your monthly payments, but you’ll end up paying more in total interest than you would with a shorter-term loan.

• Fees: Some lenders charge an origination fee, which is usually 1% to 10% of the loan amount. This fee increases your APR and a lender may take it upfront, effectively lowering your total loan amount.

• Monthly payments: Check the monthly payment and make sure that you can comfortably afford the loan in your budget. 

• Features and benefits: Identify features that are important to you, like flexible payment options, help with building your credit or direct payment to creditors if you’re consolidating debt.

» MORE: Personal loan features to compare

Step 4: Gather loan documents

Once you’ve chosen a loan with the rate, term and features that best fit your needs, it’s time to complete the application. Depending on the lender, you may apply for the loan online or in person.

What do I need for my loan application?

You’ll need to provide some or all of the following:

• Proof of identity, including a government-issued ID or driver’s license.

• Proof of address, including a recent utility bill or lease agreement.

• Proof of employment status.

• Income details, including bank statements or pay stubs, and proof of additional income like retirement, alimony or child support.

• Social Security number if it wasn’t submitted during pre-qualification.

If you have a co-borrower on your personal loan application, they will need to submit similar documents to verify their identity, address and income details.

» MORE: Requirements for a personal loan

Step 5: Submit your application and get funded

Submitting a formal loan application triggers a hard credit inquiry. This inquiry will shave up to five points off your score and remain on your credit report for two years.

If everything checks out, you could get same-day loan approval. If the lender requests additional documents, approval may take longer.

» MORE: How long does it take to get a personal loan?

After you are approved, carefully read and sign the loan agreement, which lays out the loan amount, APR and terms. The lender will disburse funds once the loan agreement has been signed.

How quickly you receive the money will likely depend on the type of lender you choose. Many online lenders can provide same- or next-day funding, while some banks and credit unions may take up to a week.

» MORE: Best lenders for quick cash

Once you receive funding, expect your first loan payment to be due within 30 days. If you’ve opted into automatic payments, the funds will be debited from the bank account you provided. Add your monthly payment amount to your budget to manage your debt repayment.