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To get a personal loan, you will need good credit, a stable income and a steady employment history.
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Bad credit loans are available, but rates can be high and loan amounts may be limited. You’ll qualify for a low, competitive rate with excellent to excellent credit.
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Most personal loans are unsecured, making them faster and easier to get than a secured loan.
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Shopping for personal loans with multiple lenders can give you the best deal.
Getting a loan is easy. Most lenders offer a fully online application process and only need information about your income, credit history and bank account to get a quote. Your final offer requires a strong credit check and proof of your last few paychecks.
If you have excellent credit and little credit, you can borrow up to $100,000 from other lenders with repayment terms as long as seven years. However, if you have fair or bad credit, you may need to take extra steps to increase your chances of approval and you should expect to pay higher rates and fees with more restrictions on how much you can borrow.
Knowing the steps required to get a loan can help you get quick cash for debt consolidation, home improvement, medical bills or other expenses.
Personal loan annual percentage rates (APRs) can range from just under 6% to as high as 35.99% , and the rate you get depends largely on your credit score. Higher scores (usually 670 or higher) translate to lower rates, larger loan amounts and fewer payments.
Lenders rely on your credit score to predict how likely you are to repay the loan as agreed – a higher credit score reflects your credit history, and as a result, the more likely you are to qualify for the lender’s lowest rate. The difference between a good credit loan and a bad personal loan can be hundreds of dollars per month and thousands of dollars in total interest.
According to TransUnion’s Unsecured Personal Lending Industry Insights Report, based on data from real, unsecured personal loans, here’s how your credit score can change your APR:
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Risk category
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The range of credit scores
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Average APR
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Near the beginning
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601-660
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26.90%
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Prime
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661-720
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17.80%
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Prime plus
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721-780
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13.00%
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Super prime
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781+
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10.90%
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Example: For the average borrower, a $10,000 personal loan at 27% costs about $15,000 in interest over five years — more than the loan itself.
Bank Tip
Consider working to improve your credit score if you don’t qualify for an affordable rate.
Your credit score is often the most important part of the eligibility puzzle, but lenders also review other criteria when evaluating your loan application. According to one experienced Chase Bank representative, these tests often work as a preliminary test. While each lender sets their own standards, knowing common approval metrics can help you prepare and improve your chances of qualifying.
Determine how much you should borrow and how much you can afford to pay each month. Personal loans are installment loans, which means you get the full amount upfront and pay it back in fixed monthly payments. If you need more money, you must reapply for a new loan.
Be sure to consider any initial fees when deciding how much to borrow. Some personal loan lenders charge a down payment of up to 12% of your loan amount, and the cost is often deducted from your loan amount before you receive it. If you choose a lender that charges this fee, you may need to borrow a large amount to cover the payment.
Here’s an example of how APR and fees affect monthly payments on a $10,000 loan with a three-year term:
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APR
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Origin fee
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Amount of loan received
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Monthly payment
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Total interest + fees
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9%
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0%
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$10,000
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$318
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$1,448
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15%
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5% ($500)
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$9,500
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$346
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$2,456
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25%
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8% ($800)
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$9,200
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$398
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$4,328
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Bank Tip
Once you’ve entered your loan amount, run some numbers using a personal loan calculator. Experiment with longer terms if you want to keep your payment terms low or shorter if you want to pay off the balance faster.
You will need to provide loan documents to verify the information in your application, and collecting these documents early can speed up the process later.
Some lenders may verify this information electronically.
Don’t settle for the first offer. Compare several lenders and loan types to get an idea of what you qualify for.
If you’ve had an account with your bank or credit union for a long time, see if they’re willing to give you a better rate or offer you benefits or discounts. You can also search Bankrate’s personal loan marketplace to find the most competitive loans that best meet your borrowing needs.
Prioritize lenders who offer eligibility
Pre-loan eligibility involves entering some basic information and pre-evaluating your potential eligibility and interest rate. This process does not require a strong credit check, so your credit score will not be affected. Being pre-qualified is not a firm loan offer, and your loan details may change once you officially apply, but it can be a good way to narrow down your list of potential lenders.
Once you’ve compared lenders and chosen the best fit, submit a formal application. This may include a credit crunch and additional verification.
If approved, you will receive your loan terms. Review carefully before signing – a longer term lowers your monthly debt but increases total interest costs.
Remember that the terms of your donation may change depending on the documents you provide. Ask the lender to explain any changes to your interest rates or loan amount after your initial application.
If your loan application is approved, the lender will prepare your final loan documents. Once you agree to the terms and sign the loan contract, most lenders will withdraw funds directly from your bank account within one business day from most lenders. It can take up to a week to receive the loan funds if you choose to use an original check or work with a small bank or credit union.
Keep track of when your payments are due, and consider setting up automatic payments to streamline the process. Some lenders even offer interest rate discounts if you use automatic payments.
Bank Tip
Consider paying more toward the loan principal each month, even if it’s only a small amount. Although personal loans are generally cheaper than credit cards, you’ll still save money on interest by paying off the loan early.
Getting approved for a personal loan can be a simple process. Increase your chances of getting approved by taking some steps early, such as knowing your credit score and understanding the lender’s requirements. Doing research before applying can make the difference between a green light for financing or a loan denial. Compare lenders to find the best rates and terms for your specific financial situation.
