A personal loan is a term loan often offered by banks, credit unions, and online lenders. With this type of loan, you’ll borrow a lump sum and repay it with equal monthly payments of principal and interest.
Standard repayment terms on a personal loan are two to seven years. Plus, you’ll often get a fixed interest rate. These features make personal loans easier to repay since your monthly payments don’t change, and you can pay them off quickly.
You can use a personal loan for almost any purpose, including:
- Consolidate higher-rate credit card debt
- Make home improvements or repairs
- Fund a vacation or wedding,
- Make a large purchase
They’re often unsecured—meaning you don’t need to provide collateral to secure the loan—so you can get approved and funded in a matter of days.
No matter why you might want a loan, getting one doesn’t need to be complicated. We’ll share everything you need to know about how to get a personal loan.
In this guide:
- How do you take out a personal loan?
- What do you need to get approved for a personal loan?
- Compare several lenders before applying
- How the application process works
- How long does it take to get approved for a personal loan?
How do you take out a personal loan?
You have multiple options to take out a personal loan. Common options are online lenders, banks, and credit unions. No matter which option you use, you can usually apply online. You may get approved and funded on the same day, or it could take up to a week.
How to get an online personal loan
Online lenders tend to make applying for a personal loan easy. Sometimes, you can get direct funds in your bank account on the same day. Plus, many online lenders first do a soft credit inquiry to preapprove you, which doesn’t affect your credit score.
Follow these steps to get an online personal loan:
- Search for online lenders. You can read reviews and look for lenders for your specific needs and situation. For instance, ensure the lender offers the amount you need because many have minimums and maximums (e.g., $1,000 to $25,000). Consider the credit scores it requires.
- Get your documentation in order. The process is quicker if you gather the necessary information before applying. You’ll need information about yourself (e.g., name, birthdate, tax identification number), your employer, and your income.
- Submit an online application. Before you apply, your lender will tell you whether it uses a soft credit check (no credit score impact) or a hard credit check (with credit score impact). Most use a soft credit check to prequalify you and advise on terms and rates.
- Accept the offer and get funded. Once prequalified, you can review the offers and accept the loan if it fits your needs. (You can also reject the offer if you’re unhappy with it or get a better one.) If the lender hasn’t done so, it will pull a hard credit check to finish the approval process. Upon approval, the lender will send the loan proceeds to you.
When you apply, you’ll often share details about getting the loan proceeds. Depending on the method you select and your lender, you may be able to get funding as soon as the same day (e.g., with ACH transfers), or it could take up to a week.
How to get a personal loan from a bank or credit union
You have personal loan options besides online lenders, including banks and credit unions. If you work with a traditional bank or credit union, you may have to go in person to get the loan, but many also offer online loan applications.
Like online lenders, you can compare options from multiple financial institutions to find a loan with the best possible rates and terms. The process is the same as with an online lender, but you may get more one-on-one attention with a bank or credit union.
Getting help from a lending expert at a bank or credit union is helpful for those who want additional guidance. Many online lenders can provide virtual assistance over the phone or via chat, but some borrowers prefer face-to-face visits.
As with an online personal loan, you may get same-day funding, particularly if you already have a deposit account with the financial institution. However, your loan could take up to a week to get approved and funded.
What do you need to get approved for a personal loan?
What you need to get approved varies by lender. At the most basic level, you must show you’re able and willing to repay the loan. The ability to repay is often based on your income, whereas willingness to repay is based on your credit history and score.
Most personal loans are unsecured, meaning you don’t need collateral to get approved. Since there’s no collateral to evaluate, the approval process can be quick. However, you may need to meet strict approval criteria because the lender can’t fall back on the collateral if you don’t pay as agreed.
Lenders might require a specific credit score to approve you for a personal loan (e.g., at least 620). Others evaluate your entire credit profile rather than requiring a minimum credit score. The goal is to ensure you have enough income to repay the loan and don’t have ongoing credit issues.
For example, if your credit score is low due to a resolved collection that’s unlikely to recur, the lender may not consider this an ongoing issue. However, if you’re in bankruptcy or have active collections, the lender may not approve you for a loan until you resolve your credit problems.
How your credit affects your application
The first step in the process often involves checking your credit report. You may still be approved even if your credit check shows an imperfect credit history. However, you likely won’t get the lowest possible interest rates because higher credit scores often equate to lower interest rates.
You may want to check your credit score before applying, so you’ll know what type of personal loan you should seek. Most lenders have minimum credit score requirements, and lenders can specialize in borrowers with good, fair, or bad credit.
People with very good to excellent credit can get approved for most types of personal loans and often at the lowest rates. The specific scores that fall within each category may vary by lender, but in general, the following are standard credit scores by category:
|Category||Credit score range|
|Very good to excellent||740 or better|
|Good||660 – 739|
|Fair||580 – 659|
|Bad or poor||Less than 580|
You can check your credit reports for free each year by visiting AnnualCreditReport.com. This free report doesn’t include credit scores, but you can see whether there are issues (e.g., past dues). You also have many other ways to check your credit report and score.
Many banks and credit card issuers will allow you to check your credit scores and monitor your credit reports for free. Plus, you can take advantage of many free or fee-based subscription services. The major credit bureaus (e.g., Experian, Equifax, Transunion) offer free and fee-based programs.
>> Read more: How to get a loan without a credit check
How debt affects your application
If you have debt—especially credit card debt you don’t plan to pay off with your new personal loan—it may affect your chances of getting a personal loan. Your debt can affect your credit score and ability to repay.
One of the significant factors contributing to your credit score is your credit utilization ratio, a measure of your revolving credit balances compared to your credit limits. You should strive to keep your credit utilization ratio to no more than 30%. If you can achieve 10% or less, that’s even better.
For example, if you had $10,000 in revolving credit limits (e.g., credit cards) with $3,000 in outstanding balances, your credit utilization ratio would be 30%. You can calculate the ratio by adding up all your revolving credit and dividing the result by your revolving credit limits.
Besides your credit score, lenders consider your credit utilization and debt-to-income (DTI) ratios.
DTI = monthly debt payments / Gross monthly income
Try to keep your DTI below 35%. If these ratios are high, lenders may think you can’t afford more debt and decline you.
Additional documents you’ll need
Most lenders will also request personal loan documentation during the application process. This could include documentation to provide proof of your:
- Identity: You’ll often need government-issued identification, such as a passport or a driver’s license. You may also need to verify your address and submit your tax identification number.
- Income: You may need to provide income documentation such as W-2s, pay stubs, and tax returns. The income verification you must provide often changes with the loan amount. (Higher loan amounts may require more documentation.)
- Assets: In some cases, particularly with higher loan amounts or if you don’t have a job, you may need to provide documentation about your liquid assets, such as bank or brokerage account statements.
To expedite the approval process, gather this documentation and have it available in case you need to provide it to your lender. The process will be much faster if you can provide the information to your lender as soon as requested.
Compare several lenders before applying
Lenders offer unique personal loan rates and terms, which vary based on their internal strategies and how much risk they’re willing to take. If a lender is unwilling to take as much risk, it may be harder to qualify, loan amounts may be lower, and the repayment terms may be shorter.
You can better find the right personal loan for your financial situation and needs by comparing several lenders. You can also look for lenders specializing in your specific needs (e.g., bad credit, debt consolidation, or home improvement).
It’s easy to search and compare lenders online. Plus, since many lenders will prequalify you in a few minutes with a soft credit check, it’s simple to check the rates and terms you can get with several lenders, compare the offers, and choose the one that’s right for you.
How the application process works
The personal loan application process starts by identifying a lender. Once you’ve identified a lender, you should gather the documentation you may need (e.g., personal identification and pay stubs) before applying. Once you have the preliminary documentation, you’re ready to apply.
Most lenders, including online lenders, banks, and credit unions, will allow you to apply online for a personal loan. You’ll need to input information into the application, such as your name, tax identification number, address, employer, amount you want to borrow, and how you plan to use the funds.
Before you move to the next step, your lender will tell you whether and how it will check your credit (e.g., a soft or hard credit pull) and authorize you to proceed. Depending on your lender, you may know whether you’re preapproved in a few minutes, or it could take a few days.
Once preapproved, you can review your rates and terms. If you want to proceed, select your desired loan, and finish the application process (e.g., upload any required documentation). After the loan is approved, you’ll sign the loan documents and get funded.
How long does it take to get approved for a personal loan?
The time it takes to get a personal loan varies by lender, but many lenders can approve borrowers in minutes. However, depending on your chosen lender and financial situation, it could take up to a week.
Many lenders will auto-approve or auto-decline your application if it meets or doesn’t meet standard criteria. If you’re in the middle, the lender may escalate your application to a manual review process, which could take as little as a few hours or several days.
Some lenders, such as credit unions and small banks, manually review personal loan applications. Getting approved for a personal loan could take a few days as your lender works through the paperwork.
Remember: The more thorough you are on your application and the more responsive you are to your lender’s questions, the quicker the process will be.
>>Read more: Common personal loan charges and fees
Can I get a personal loan if I’m unemployed?
You can get a personal loan if you’re unemployed, but qualifying may be more challenging. Your lender may consider other income sources (e.g., retirement, disability) and liquid assets (e.g., cash, stocks) instead of a job. You must show you can repay the loan without a job to get approved.
Can I get a personal loan with a co-applicant?
Depending on the lender, you may be able to get a personal loan with a co-applicant. Many lenders will allow you to apply with another borrower, making qualifying easier because both applicants’ credit scores and incomes are used for loan qualification.
Can I take out a personal loan with a cosigner?
Many lenders allow you to take out a personal loan with a cosigner, but others don’t. If a lender allows this, it might approve you for a better loan than you might get on your own. The lender also considers your cosigner’s credit score and income rather than just yours.
What credit score do you need for a personal loan?
Many lenders require at least a 620 credit score to qualify for a personal loan. However, some may want you to have a higher score (e.g., at least 660), whereas others allow lower scores (e.g., at least 580) or have no minimum credit score requirement.
Are there personal loans for single mothers?
Being a single mother doesn’t directly affect your ability to get a loan. You have many personal loan options if you qualify. As long as you meet the lender’s qualifications (e.g., credit score, DTI ratio), you can be eligible for a personal loan as a single mother.
Can I get a personal loan for veterans?
You have several options for personal loans for veterans. Not all lenders have specific veteran personal loan programs, but you can get a personal loan if you qualify. The best rates and terms are reserved for those with the best credit, but you can find bad-credit options.
Can I take out a personal loan for students?
Many personal loans are available for students. You may even qualify for a loan with a cosigner if you can’t qualify alone. However, before you take out a personal loan, ensure you can repay it and that it won’t put you deep in debt before you even get out of school.
Can I get a personal loan as a non-U.S. citizen?
Yes, you can get a personal loan as a non-U.S. citizen. If this is your situation, you’ll need to search for lenders who offer personal loans to non-U.S. citizens. Not every lender does this, making it crucial to find one that offers this before applying.
Can I take out a personal loan for home improvements?
Many lenders allow you to use personal loans for home improvements. You can often get these loans faster than a home equity loan or line of credit because your home isn’t taken as collateral. However, remember you may pay a higher rate on a personal loan since it’s unsecured.
How to get a personal loan with no credit or bad credit
You may get a personal loan with no credit or bad credit. Some lenders offer both types. However, qualifying for these types of personal loans isn’t as easy because fewer lenders offer them. Plus, you’ll often pay a much higher rate and may get a shorter repayment term.