How to Prequalify for a Personal Loan

Prequalifying for a personal loan is a step before the official loan application process. At this stage, lenders will assess you as a borrower and give you an estimate of the loan amount and terms you may qualify for. 

However, prequalification does not guarantee loan approval. The lender will review your financial information in more detail before accepting you. Today, we’ll go over what prequalification involves and how you can prequalify for a personal loan. We’ll also mention our top picks for lenders that offer personal loan prequalification.

Table of Contents

1. What is personal loan prequalification? 
2. What is the difference between personal loan preapproval vs. prequalification? 
3. How to prequalify for a personal loan 
4. Lenders that offer personal loan prequalification 

What is personal loan prequalification? 

If you’re planning a major purchase and need a personal loan, you’ll want to find out how much you can borrow. You’ll also prefer to run this check without affecting your credit score.

That’s where personal loan prequalification comes into the picture. It’s a first-step, approximate evaluation the lender runs on you based on financial info, such as income and employment records, and a soft credit check. Then, the lender essentially tells you, “These are, more or less, the terms you may expect if you proceed with a formal loan application.”

Lenders offer prequalification as a fast, easy, and risk-free way for borrowers to explore their loan options. You can submit your information to different lenders or a loan marketplace (our favorite is Credible) and compare ballpark offers. Not all lenders offer prequalification, but many reputable loan providers do.

A prequalification isn’t an official loan application, and the answer you get from a lender doesn’t ensure it will approve you. However, it can give you a solid idea of:

• How much you may be able to borrow
• How long it would take you to repay the loan
• How the loan payments would fit into your monthly budget

In my experience, these prequalification offers tend to be more favorable than the actual terms offered. That depends upon the accuracy of the information you provide when running the prequalification quotes. Remember, they will pull your credit and look under the hood, so if you want an accurate idea of what the loan will look like, you must provide accurate information.

This is similar to getting preapproved for a mortgage. Sometimes you will be qualified for more than you will get in the form of a mortgage.

Preapprovals are much more insightful and worth the slight extra effort for greater detail and insight into your loan provisions.

What is the difference between personal loan preapproval vs. prequalification? 

Prequalification is a quick process that lets you know whether you meet a lender’s general terms and approximately how much you can afford to borrow. It involves little effort on your part and requires no commitment from you or the lender.

Preapproval is the next step in applying for a personal loan. It gives you more precise details about the loan you could qualify for, including the amount, interest rate, fees, and repayment period. 

Preapproval involves a more detailed review of your financial information. The lender will look into your:

• Cash flow
• Debt obligations
• Loan repayment history
• Other factors that may influence your credibility as a borrower

Preapproval also usually requires a hard credit check, which may make your credit score drop by a few points. Note that preapproval still doesn’t guarantee acceptance, but once you’re preapproved, the lender will likely accept your application.

Some lenders offer both prequalification and preapproval. Others forgo prequalification, and some even skip preapproval and move straight to the official application step. Auto loan and other personal loan providers that offer preapproval usually do so to help potential borrowers feel more secure in submitting their loan applications.

How to prequalify for a personal loan 

Prequalifying for a personal loan is straightforward. We recommend that you start by researching and comparing lenders to understand the range of available loan amounts and repayment terms for your desired type of personal loan (for instance, a secured or unsecured loan or a personal line of credit).

As you look into various lenders’ loan options, you’ll be able to estimate whether you meet broad criteria such as income and credit score.

Fill out the prequalification form

Lenders that offer prequalification usually have a quick, simple online form you can fill out within minutes. You’ll typically need to enter your:

• Personal details: Full name, contact info, date of birth, and Social Security number
• Financial info: Annual income, major monthly expenses (e.g., mortgage or rent), current debts, and employment status (e.g., employee, self-employed, or retired)
• Requested loan information: Loan purpose (e.g., auto or home improvement loan) and the amount you hope to borrow. You might also be able to select the loan maturity date—when it will be paid off.

After you submit the form, the lender will process your details and run a soft credit check. As we mentioned, this does not affect your credit score. A soft credit check only gives the lender a bird’s eye view of your credit history and whether you likely meet its requirements.

Consider offers from lenders

If you’ve entered a prequalification form with an online lender, you’ll likely get a response within minutes. Traditional institutions, including banks and credit unions, may take longer to process forms (if they offer prequalification at all). 

This faster turnaround is often due to AI running the numbers versus an actual person.

Viewing the lender’s preliminary offer will help you decide how to proceed. If the loan amount and terms it proposes meet your needs, you may go on with a formal application. If not, you can continue loan shopping. 

You can also review several offers side by side and go with the lender that offers the best terms (e.g., the lowest interest and fees or a flexible repayment period).

Remember, the prequalification results are only an estimate, not a commitment. The lender will look into your information more closely if you take the next step and apply for a loan. 

Will you need to attach any documents during prequalification?

Usually, no. Prequalification is just an assessment based on self-reported details. However, to move forward with a loan application, you’ll need to share documents supporting the information you entered.

Specifically, the lender will likely ask for an official ID, proof of address (e.g., utility bills), and records of employment and income. Prepare to provide documents like your employee contract, pay stubs or bank statements, and tax returns. 

Lenders that offer personal loan prequalification 

Prequalification is quick, simple, and risk-free, so go ahead and explore lenders that offer this option. Using Credible or a similar marketplace will streamline the process since you only need to submit your info once to get offers from multiple vetted lenders. However, if you have a specific lender in mind, it can make sense to check its terms first.

When looking for a personal loan, make sure the lender offers loan amounts in the range you need. Some lenders focus on small loans, while others cater to clients who need $100,000 or more. Also, look into repayment terms, interest rates, and total fees. Finally, make sure you understand any penalties you’d face if you repay the loan early or miss a payment. 

The following table shows the companies our team has determined are the best personal loan lenders.

It’s by no means an exhaustive list of companies and marketplaces that invite you to prequalify for loans, but it’s an excellent starting point for personal loan shopping.